Pound hits two dollar markExperts believe sterling will remain strong

17 April 2007

 

50 pound notes

Holidaymakers heading for the US are likely to hit the shops after the pound hit the two dollar mark for the first time in nearly 15 years.

Sterling was last at that level just before it was ejected from the European Exchange Rate Mechanism in 1992.

Analysts believe the pound will continue to remain strong against the dollar for some time. Howard Archer, Chief UK and European economist at Global Insight, said: ‘We believe that sterling could well remain above two US dollars for an extended period.

‘In the near term, the pound is likely to be supported by expectations that UK interest rates will not only rise to 5.5 per cent in May, but could well rise further still thereafter.

‘Although we currently forecast that interest rates will peak at 5.5 per cent, there is clearly a markedly increased possibility that they will reach 5.75 per cent or even 6 per cent.’

US holidays

The strength of the pound against the dollar is good news for Britons travelling to the United States.

Virgin Atlantic said bookings to the US have been ‘very strong’ in recent months, with flights to New York rising by as much as a fifth over Christmas compared with the previous year.

Shoppers hoping to make the most of the favourable exchange rate will have to stick by the £145 limit on all goods, including gifts and souvenirs, from non-European Union countries or face paying UK tax.