Good news for half term

by Ed Bowsher on 19 May 2009  |  1 comment
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If you're planning a half-term break abroad, we have some good news for you.

If you're planning on going away for the bank holiday, I have some good news for you: The pound is on the up! That means you'll have more money to spend if you're in euroland or the US next week.

The pound rose 0.9% this morning to $1.5476 - the highest level this year. It also rose 0.3% against the euro to £0.881. These rates aren't as high as a year ago, but they're still welcome news for British holidaymakers.

The rising pound has been partly driven by the rising stock market and increased confidence in the solvency of UK banks. The UK economy is weighted strongly towards the financial sector, so any news that British banks are getting stronger makes the UK a more attractive place to invest. Increased investment in the UK increases demand for sterling which drives up the exchange rate.

Of course, a rising pound isn't good news for everyone. Recent falls in sterling have made it easier for UK businesses to sell their goods abroad, so a rising exchange rate could choke off any nascent signs of economic recovery.

That said, I don't think readers should get too carried away. I'm still quite gloomy about prospects for the stock market and the UK economy, so I think there's a good chance the pound will start falling again before too long. I reckon now is a good time to buy your holiday currency for the summer.

And if you're taking a half-term break next week, have a good one!