Sterling vs. euro - eight years on from the financial crisis

Many view 9 August 2007 as the day the global financial crisis began.

BNP Paribas, France’s largest bank, suspended dealing in three funds invested in “collateralised debt obligations” linked to US sub-prime mortgages.

BNP was the first major bank to acknowledge the risk of exposure to sub-prime mortgage markets; Northern Rock chief executive Adam Applegarth later said this was "the day the world changed".

What followed is well-documented. Unsurprisingly shockwaves ran through financial markets and foreign exchange was no exception. Sterling has seen some dramatic fluctuations since then. The sterling/euro exchange rate, in particular, has experienced considerable volatility in the past eight years, but now stands close to pre-crisis levels.

Sterling falls against the euro

The sterling/euro exchange rate fell dramatically from €1.48 on the eve of the crisis to close to parity (one-to-one) by the end of 2008. The weakening of the pound mirrored a weakening economy. The UK’s over-reliance on its banking sector meant the global financial crisis was more keenly felt in the UK than in other economies. The UK’s slump was the joint-second largest among the major advanced economies (only Japan fared worse) and UK workers suffered most in terms of lost jobs and falling real incomes.

The pound strikes back

contd..

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