How high can the pound rise against troubled euro?

Sterling has been backed to extend gains against the euro despite rising to a three-and-a-half-year high this week, as investors' fears over the future of the eurozone play out in money markets.

Just days after the European Central Bank cut its main interest rate to 0.75% and deposit rate to zero, the euro has fallen to a multi-year low against the pound. Yesterday the pound hit a high of €1.2658 during trading, its highest level since early 2009. In the last year it has risen from €1.13 as the impact of the eurozone's sovereign debt crisis takes its toll - albeit slowly - on the single currency. Against the dollar it is a similar story, with the euro moving from $1.45 down to just $1.23 in the space of 12 months. But where does it go from here? Further down in the near...