The pound can buy more dollars than at any point in the last 15 months after the US rate of inflation slowed to its lowest rate in more than two years.
One pound bought $1.30 on Wednesday afternoon, the highest amount since April 2022 as the dollar weakened.
A stronger, more valuable pound means importing goods – such as food and petrol – becomes less expensive.
Cheaper import costs can help bring inflation down as costs for businesses and households are reduced.
The rise in value follows announcement of the lowest US inflation figures in more than two years.
Official US figures showed the consumer price index (CPI) measure of inflation stood at 3% in May. While prices are still continuing to rise, the rate is lower than economists had expected and just above the Federal Reserve’s – US central bank’s – 2% target.
Please use Chrome browser for a more accessible video player
Sky’s Ed Conway shows that consumer debt is a long way from where it was at the height of the financial crisis.
The UK is an outlier when its rate of inflation is compared to the US and eurozone rates. Its CPI rate stood at a stubborn 8.7% with core inflation – the rate of prices rises excluding food and fuel – increasing to 7.1%.
Inflation in the 20 countries using the euro reached 6.1% in May, latest data showed.
The next move for the Federal Reserve, in response to the inflation announcement, is unclear. It had been expected to increase interest rates in two weeks time, after holding rates last month.
Central banks across the world have upped interest rates, making the cost of paying debt – such as mortgages or credit cards – more expensive in an effort to take money out of the economy and dampen inflation.
In the UK the Bank of England is likely to increase rates by 0.5 percentage points due to the high inflation rate.
The pound has also increased against the euro with £1 buying €1.16.
The UK inflation rate for June is to be announced on Wednesday next week.
For all the latest business News Click Here
