The pound may buy more dollars than at any time in the past six months after the US inflation rate slowed to its lowest rate in nearly a year.
A pound could buy $1.24 on Tuesday afternoon, the highest amount since early June.
A more valuable pound means that importing goods, such as food and petrol, becomes cheaper. The lower import costs in turn can help lead inflation as costs for businesses and households decrease.
The increase in value, from $1.22 this morning, follows the announcement of the lowest US inflation data in nearly a year.
Official data showed inflation rose 0.1% in November, lower than economists expected and the smallest increase in nearly a year.
For the full year to last month, inflation rose 7.1%, a decrease from June, when US inflation stood at a 40-year high of 9.1%.
Supply chain difficulty Associated with COVID-19 blockades, labor shortages and sky-high energy costs caused by the war in Ukraine they had all driven prices up throughout the economy.
The latest announcement of a slower pace of price increases could signal that the worst inflationary pressures are over.
However, inflation is still multiples of the US central bank’s 2% target rate. The Federal Reserve, known as the Fed, has been steadily raising interest rates in an effort to slow down the economy and consequently inflation.
The regulator is expected to announce on Thursday yet another increasethis time 0.5%.
Higher interest rates make the cost of paying down debt — such as mortgages or credit cards — more expensive.
If the 0.5% rate hike occurs, US interest rates will be at their highest since 2007.
While the pound maintained its gains against the dollar all afternoon, settling at $1.23 tonight, the pound is still down against the dollar this year.
Since peaking against the dollar in mid-January this year, when 1 pound bought $1.37, it has plummeted to a historic low in the wake of mini-budget shocked market in September.
Its value has constantly insinuated from.
The pound has also risen against the euro and, since October, 1 pound has bought around 1.16 euros.
UK inflation data is also expected to be announced on Wednesday of this week and the Bank of England is expected to announce higher interest rates on Thursday.