Pound exchange rate: Sterling hits highest rate against US dollar in a year

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Sterling today climbed to its strongest position against the dollar for almost a year.

On Tuesday, one pound bought $1.3257 amid news that UK inflation unexpectedly rose in August.

The shift put the currency at its highest point versus the dollar since mid-September 2016.

It means £500 of spending money for a week away in New York now buys an extra $60 compared with eight months ago.

Against the euro, the pound also climbed slightly to €1.11 but lagged behind its 12-month high of €1.1967 in April.

It came as the Office for National Statistics announced UK inflation on the Consumer Price Index rose to 2.9 per cent in August.

Economists believe higher inflation has been brought about partly thanks to Sterling’s weakness since last year June’s Brexit vote, which shook confidence in the British economy.

Howard Archer, chief economic adviser to financial analysts and forecasters EY ITEM Club, said: “Inflation now looks likely to move just above three per cent in the near-term, but there remains a good chance that this will be the peak barring sustained renewed sterling weakness.

“In fact, sterling has strengthened in recent days.

“The [Bank’s] Monetary Policy Committee will likely warn on Thursday that any sustained sterling weakness will increase inflation risks and could prompt an interest rate hike sooner rather than later.”

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