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Is now the best time to buy travel money for summer holidays?

travel money
With the euro dropping to new lows against the pound, holiday-makers may want to consider getting their travel money now. (Innocenti via Getty Images)

The pound has surged to a 22-month high as the euro crashed after Emmanuel Macron called for new parliamentary elections in France. With your money being worth more abroad, is it time to buy your travel money now?

The euro has dropped to its lowest level since August 2022 against the pound, which rose to €1.18 on Monday, up half a euro cent, a level last seen shortly before former prime minister Liz Truss’s mini-budget sent sterling tumbling.

If you have plans to go to Europe, it would be smart to take advantage of the strong pound – or weaker euro. Currency rates are very volatile so waiting for an even better time to buy euros is a risky game.

The euro has been getting cheaper in recent months as it became clear that interest rates would be cut faster in the eurozone than in other advanced economies but last night's European elections' results have put everything in overdrive.

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The value of the euro dropped to its lowest level in nearly a month after Emmanuel Macron called for new parliamentary elections in France following a humiliating defeat in the vote for seats in the European Parliament to Marine Le Pen’s hard-right National Rally.

"With the pound currently stronger against the euro than it has been in recent weeks, now may be a good time to consider buying your travel money if you're travelling soon," said Sam Richardson, deputy editor of Which? Money. He said when you buy is just part of the picture – "it's just as important to consider where you buy. Never leave buying currency to the last minute as airport bureaux de change rarely offer competitive rates - instead shop around online and compare rates before making a decision, and always remember to factor in any additional fees.

"Though many people like to travel with a small amount of cash on holiday, you may also wanted to consider alternatives such as a credit or debit card with a zero percent foreign transaction fee - that way you'll not be left with currency to change back at the end of your trip, and will usually benefit from better conversion rates than converting cash - just remember to make purchases in the local currency."

Read more: How to get the best holiday exchange rates

The calling of a snap election in France and the apparent success of EU-sceptic parties in the European parliamentary election has spooked markets, which sent the euro crashing. Bill Blain, market strategist at Wind Shift Capital, explained why.

"There is nothing like the prospect of increasing European political instability, rising distrust of the EU and its agencies (including the ECB), and internal dissent to rile bond markets thinking about European sovereign bond markets," he said.

"The concept of a united monetary and fiscal union in Europe moves further away."

The pound has also been boosted after analysts at JP Morgan said a Labour win in the UK general election would be a positive development for the financial markets.

And a poll conducted by Bloomberg has found that a Labour victory in next month’s UK election would be the best outcome for the pound, while a hung parliament was seen as the worst result.

Matthew Ryan, head of market strategy at global financial services firm Ebury, said: “The prospect for an overwhelming Labour victory at the general election next month is actually buoying sterling, which has broken out of its year long range against the euro.

"Markets view a Labour majority as perhaps the most market-friendly outcome of the elections – a reflection of both the lingering damage done by Liz Truss’s ill-fated budget, a shift towards the political centre under Keir Starmer and the likelihood of a less contentious relationship with the European Union."

To show how this can impact your travelling budget, at the moment you only need £845 to buy €1,000. Another way to look at it is that £1,000 will get you in €1,182.

Go back just a few weeks to when the European currency was stronger, and those same €1,000 would have cost £866. Once market uncertainty clear, the euro is expected to recover, making your European holiday potentially pricier.

Sterling is 6% stronger than in the aftermath of the 2022 mini-budget, when the pound fell and was only worth €1.11.

The euro has further to fall, according to analysts, amid concerns that a far-right French parliament would cause paralysis in Europe’s second largest economy. This could potentially give travellers a bigger window to buy the currency.

Chris Turner, global head of markets at ING, said: "Expect to hear much made of the diverging political scenes, where the forthcoming UK general election is expected to present the UK with a very large Labour majority, whereas the French election promises to deliver a parliament diametrically opposed to the presidency. We probably cannot rule out EUR/GBP edging a little lower this week – perhaps to 0.8400."

However, that window is likely to close soon, ahead of the Bank of England's interest rate decision.

"But we think this sterling rally does not last and probably reverses next week when we hear from the Bank of England next Thursday - likely preparing the market for an August rate cut," he added.

The strong pound is not only good news for those planning to enjoy Europe as other currencies are momentarily cheaper.

The Indian rupee is down around 4% against the pound this year, meaning £1,000 will get you INR 106,044.27 today. The same exchange just a month before would pocket you less, just 103,535.45.

The currency as been under pressure following the country's elections, as prime minister Narendra Modi's narrow win stunned markets.

Read more: Best UK savings accounts offering above inflation rates

The pound has also strengthened against the Swiss franc – one of the world's strongest currencies – with £1,000 getting you 1,138.68 Swiss Francs. The sterling is actually 0.3% higher against the franc over the past 12 months although this Monday it was basically flat.

The dollar, however, remains king, with pound lower against the US currency this Monday. The pound has fallen against the dollar after stronger than expected employment figures dampened hopes for summer interest rate cuts from the Federal Reserve.

Sterling was down after US employers added 272,000 jobs in May, up from April and more than economists expected.

The data also showed wages rose at a pace of 4.1% in May. Fed officials have warned that a strong jobs market could impact the timing of rate cuts. For now, £1000 will buy you $1,272.

Watch: Euro hit by shock Macron call for snap election

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