By Thomas Biesheuvel and Jonathan Browning Dec. 15 (Bloomberg) -- Country musician Rob Childs shook his head in disbelief after buying euros at London’s St. Pancras International train station. After paying commission, he got 57 euros ($77) for 60 pounds ($90), as the rate of 1.0185 euros at the International Currency Exchange he used heads toward parity. A year ago, he would have received about 80 euros. “I’m a little dumbstruck,” said Childs, 47, with a guitar slung across his back, as he waited for a Eurostar train to Brussels where he was en route to perform with American comedian Rich Hall. “It doesn’t leave much spending cash.” The pound has dropped 18 percent against the euro and 24 percent versus the dollar this year as the Bank of England reduced interest rates and the U.K. economy slid into its first recession in 17 years. The pound bought 1.1173 euros today, falling for a sixth day against the euro, and money changers are charging close to one pound for one euro before commission. “The pound is hopeless, it’s time to dump it,” said Ian Wright, 53, an upholsterer, as he waited to board a train bound for Antwerp in Belgium for a bachelor party. “All this British tradition stuff about keeping the pound is rubbish.” British tourists may have to be more selective in their traditional sight-seeing as prices, at least for them, rise. Pricier Paris The cost of climbing the Eiffel Tower in Paris has surged to 11.16 pounds from 9.08 pounds last year, according to rates from the Post Office, the U.K.’s largest travel exchange bureau. A five-day ticket at Disneyland Paris has risen to 109.80 pounds from 89.37 pounds, prices show. A night in a presidential suite at the 5-star Hotel Adlon Kempinksi in Berlin would cost about 8,933.56 pounds, compared with 7,271.07 pounds in December last year, based on the hotel’s rates on its Web site and Post Office exchange rates. Peter Maltby said he’s buying euros now before a visit to Germany in June. The pound is down from more than 1.50 euros in the middle of last year. “The only thing I can do is to be defensive and to get my money into euros,” said Maltby, 65, outside a bureau de change, selling 1.095 euros for every pound in London’s West End. “I want to make a position now.” Scrambling to limit the fallout from the global financial crisis, the Bank of England has cut its benchmark interest rate to 2 percent from 5.5 percent at the start of the year. The European Central Bank has pared its benchmark to 2.50 percent. No Target The Bank of England moves have “been one of the catalysts why euro-sterling has gone up so quickly,” said Jeremy Stretch, senior strategist in London at Rabobank International, the third- largest Dutch bank. “We’re probably going to see most likely another 100 basis points off rates.” U.K. Treasury Chief Secretary Yvette Cooper said yesterday the government doesn’t target the pound and is instead focusing on tackling inflation. While British travelers bemoan sterling’s slump, tourists arriving in London are toasting the currency’s fall. U.K. customers “expecting rates of 1.40, 1.50 are in shock,” said Andrew Hamilton, a spokesman at International Currency Exchange in London. “The French are actually ecstatic when they see the rate.” Arriving from Paris, Andrea Martinez, 30, said the slumping pound will make her weekend of eating and drinking cheaper. “Before, everything here was so expensive,” said Martinez, as she waited at St. Pancras for her boyfriend to pick her up. “I’m hoping to get much more for my euros.” ‘Gutted’ Close by, Wright, the upholsterer, and John Fahey joked about who had got a worse rate as they sipped coffee before traveling to Antwerp. Wright said he was pleased to get 1.15 euros per pound a month ago. “I’m gutted,” said Fahey, 52, a full-time carer. “I got mine at 1.08.” It may not get any better for beleaguered Britons anytime soon. The pound may drop to parity with the euro in the first quarter if the ECB is slow to cut borrowing costs, according to Stephen Gallo, head of market analysis at Schneider Foreign Exchange in London. European Central Bank policy makers last week signaled they are reluctant to cut interest rates much further after three reductions since October, and may not trim borrowing costs again next month. ECB council member colleague Axel Weber said on Dec. 11 he “would like to avoid” taking the rate below 2 percent. Meanwhile, back in London, musician Childs wondered if he would be paid in euros or pounds at the Brussels gig. “Let’s hope it’s in euros,” Childs said. “At this rate I’ll make a killing.” To contact the reporter on this story: Jonathan Browning in London jbrowning9@bloomberg.net; Thomas Biesheuvel in London tbiesheuvel@bloomberg.net.

Source