The tax increases announced in the emergency Budget will not greatly alter the fortunes of the sterling in the long-term, according to a Forex specialist.

Stephen Hughes, chief analyst at Foreign Currency Direct, said today's Budget would have little effect on the currency despite the predictions of some industry doom-mongers.

He said: 'The markets have already factored in the spending cuts and tax hikes announced in this afternoon's Budget so the new age of austerity won't fundamentally change sterling's fortunes over the longer term. We're predicting that sterling could reach €1.26 by mid July.

'That said, the Chancellor's tough talk and confident delivery has done much to reassure investors and as a result we can expect to see the pound enjoy some modest short term gains.'

Over the medium term sterling should continue to benefit from Europe's woes and those holidaying on the Continent this summer will find it better value than 12 months ago, Hughes said.