Sterling has reached its highest level in more than three years, presenting an opportune moment for holidaymakers to exchange their pounds for foreign currency.
The pound surged past $1.3750 against the dollar on Thursday, hitting its highest level since October 2021.
The surge means holidaymakers will receive more dollars, euros and other currencies for their pounds compared to recent months.
Financial experts are urging travellers to consider exchanging money now to take advantage of the strong pound.
The pound has gained strength because the US dollar is weakening, with growing expectations that the Federal Reserve (US Central Bank) will cut interest rates.
The pound is riding high against the dollar is good news for anyone heading to the US this summer
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The timing is particularly beneficial for those heading to the United States or destinations where dollars are widely accepted.
The pound has surged 8.7 per cent against the dollar this year, though it has fallen 2.9 per cent against the euro over the same period.
Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “The fact the pound is riding high against the dollar is good news for anyone heading to the US this summer.
“But it also benefits anyone travelling to tourist areas in countries where dollars are widely accepted – like Mexico, Jamaica, the Bahamas, Cambodia, and Vietnam.
“If you exchange your holiday money now, it’ll boost your holiday spending fund, so this could be a prime time to buy.”
Janet Mui, head of market analysis at RBC Brewin Dolphin, told CNBC that “the relative strength of the pound has been more of a weak U.S. dollar story this year.”
She suggested the pound’s upward trajectory is attributable to underlying dollar weakness rather than faith in sterling itself.
Pound sterling was recovering from the “extreme low” seen following former Prime Minister Liz Truss’s policies in 2022
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Paul Jackson, global head of asset allocation research at Invesco, agreed that much of the movement this year was due to dollar weakness.
He noted sterling was recovering from the “extreme low” seen following former Prime Minister Liz Truss’s policies in 2022.
James Lynn, Co-Founder of travel debit card Currensea, said: “People can try to take advantage of the strong performance of the pound against the dollar by exchanging their holiday money now.
“But the pound could continue to rise, so this doesn’t guarantee you’ll get the best rate.”
Financial experts are urging travellers to consider exchanging money now to take advantage of the strong pound
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Market watchers remain divided on sterling’s future trajectory.
Paul Jackson of Invesco forecasts the pound could reach $1.40 within 12 months, representing a roughly 2.9 per cent premium from current exchange rates. He expects “GBPUSD to be around 1.40 and GBPEUR to be around 1.15” in a year’s time.
However, Mui suggests “further upside for the pound may be limited due to softer UK economic momentum and more scope for the Bank of England to cut rates.”
She noted that improved relations with the EU could serve as a potential catalyst for sterling in the longer term.
Experts are split on whether the pound will stay strong, as it depends on how the US dollar performs and how the UK economy holds up.