Pound hits highest level against the euro in more than a year – should you buy your holiday money now?

If you're hopping across to the continent for your holidays this summer, you'll get more pina colada for your buck - well, pound - as sterling this week hit a 12-month high against the euro.

British holidaymakers can currently exchange £1 and get €1.17 euro in return, compared to around €1.15 six months ago.

The difference means your holiday budget could stretch further, whether you're paying for meals, drinks, attractions or accommodation.

Excellent news for anyone heading away this summer, but could the pound get even stronger? Or should you lock in your summer money now?

What does the strong pound mean for holidaymakers?

If you're travelling to top holiday destinations that use the euro, including Spain, France, Portugal, Italy and Greece, you'll now be able to receive more euros when exchanging your pounds.

For example:

• £500 now converts to around €585, compared with €575 six months ago when the exchange rate was around €1.15 to the pound, giving an extra €10.

• £1,000 converts to around €1,171, compared with €1,150 six months ago, giving travellers around €21 extra.

Every extra euro can help cover all the holiday extras that quickly add up, including meals, drinks, airport transfers or tourist attractions.

Should you buy your euros now?

The problem is that no one knows exactly what will happen with exchange rates and they are notoriously volatile, changing very quickly in response to both political and economic news.

If you're going away in a month or so and don't want to risk missing out, you should perhaps consider buying at least some of your holiday money now.

Then if sterling improves further, you'll also to buy more cash at the better rates.

The most important mistake to avoid is buying cash last minute at the airport bureaux de change.

At the departure gate is usually where you'll fine the least competitive rates from currency providers.

Instead compare rates from several providers - you'll often find that specialist currency providers offer the best rates as oppose to high street banks.

But always check for commission and delivery charges.

Another option is to consider using a travel debit card with low or no foreign transaction fees- though this will work with exchange rates at the time.

Why is the pound stronger?

Exchange rates move constantly in response to economic data, interest rate expectations and global events.

The recent rise in the pound is in part because investors believe UK interest rates will remain relatively high compared with those in the eurozone.

Higher interest rates can make a currency more attractive because they typically offer better returns for investors holding assets in that currency.

Which countries use the euro?

The euro is used in 20 European Union countries, including many of the UK's most popular holiday destinations such as Spain, France, Portugal, Italy, Greece, Ireland, Cyprus and, Malta.

If you're travelling to one of these destinations, you're in luck because the stronger pound means your holiday spending money could go further than it did earlier this year.