The Pound climbed to $1.1613 in late morning trading on Friday after falling to the lowest rate since 1985 earlier this week.
The Sterling rose on sliding dollar strength, with most major currencies making moves against the greenback’s surge in the last several days.
The currency slipped to a 37-year low of $1.1407 earlier this week on a strengthening dollar and a gloomy UK economic outlook.
Meanwhile, the Euro climbed against the dollar to $1.0079 from its close at $1.0003 on Thursday.
The European Central Bank (ECB) announced an aggressive 0.75% rate hike throughout the Eurozone, strengthening the Euro which had previously fallen below parity against the dollar as the war in Ukraine ravaged the continent.
The UK received a surge of much-needed relief in the form of Prime Minister Liz Truss’ new energy relief plan, which is set to cap energy bills at £2,500 for households.
Previously, the price cap was scheduled to rise 80% to £3,549 per year, sending the UK’s darkening economic prospects spiralling, with inflation spiking and consumer confidence hitting the lowest point on record.
Soaring food and energy prices have been the major drivers behind the pessimistic outlook across the UK and Europe, with the Pound and Euro falling against dollar strength.
“Today it’s a dollar story, and we are seeing the pound trade in line with that broader theme…” said Simon Harvey, head of FX analysis at Monex Europe.
“We’re finally seeing central banks pushing back against this stronger dollar narrative, and we’re starting to see fiscal authorities responding to the causes of it especially in Europe.”