22-05-2025
Huge boost for summer holidays as pounds rises to highest level in THREE years – what it means for your wallet
We've listed the alternatives when it comes to spending abroad
HOLI-BOOST Huge boost for summer holidays as pounds rises to highest level in THREE years – what it means for your wallet
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THE pound has soared to its strongest value against the US dollar in over three years.
Last night, sterling was trading at £1.3468 against the dollar – its strongest level since February 2022 – bringing good news for holidaymakers chasing the sun.
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This is because a strong pound means that sterling has more purchasing power relative to other currencies.
This also means that holidaymakers can get more for their money when exchanging cash for the summer holidays.
The pound's strength is linked to what people expect the Bank of England to do with interest rates.
Experts now expect the Bank of England to reduce interest rates just once more this year, instead of the three cuts previously predicted.
This change is due to rising costs for gas, electricity, water, and travel, which pushed UK inflation to its highest level in 15 months (3.5%) in April, exceeding economists' expectations.
With inflation higher than predicted, the Bank of England may be cautious about making more rate cuts.
Earlier this month, it already reduced rates from 4.5% to 4.25%.
Meanwhile, in the US, experts believe the Federal Reserve will cut interest rates twice this year.
Since the UK is only expected to cut rates once, it seems more appealing to investors, pushing up the value of the pound.
Countries with higher interest rates attract investors because they offer better returns on their money.
Best travel money options: currency, cards and tips for spending abroad
Sarah Coles, head of personal finance at Hargreaves Lansdown, said: "As a result, investors can make a better return in the UK, so money flowing here has pushed up the value of the pound against the dollar.
"If you are travelling to the US this summer, it might persuade you to exchange at least some of your cash while the pound is riding high."
What does this mean for my money?
A stronger pound is great news for holidaymakers, as it means you'll get more travel money when exchanging cash.
For example, if the pound-to-dollar rate is $1.34/£1, exchanging £100 would give you $134, compared to $132 just a week ago.
To make the most of your travel money, consider ordering your currency online in advance to avoid the poor exchange rates often found at airport bureaux de change.
Tools like TravelMoneyMax on can help you compare rates from different providers, ensuring you get the best deal.
Alternatively, overseas spending cards are a convenient option, allowing you to avoid carrying large amounts of cash while still benefiting from favourable exchange rates.
A stronger pound can also impact your pension or investments.
If you hold shares in companies based overseas, their value may be influenced by currency movements, which could affect your returns.
