Sterling extended its recent gains, hitting a 15-month high, as weaker-than-expected US inflation figures increased expectations that interest rates were close to peaking across the pond.
This is in sharp contrast to the UK where the Bank of England is expected to continue hiking rates as it battles stubborn domestic pricing pressures.
This divergence of expectations has boosted the attractions of the pound and reduced the allure of the dollar with sterling up a further 0.54% today at US$1.3057.
The pound vs the US dollar over the last two years Source: Refinitiv
The dollar also weakened against the euro to US$1.1162, down 0.3%, but stabilised against the Japanese yen after falling Wednesday.
The headline US CPI figure showed annual growth of 3.0%, the lowest level since April 2021, while core inflation - which excludes items such as food and energy - was 4.8% in June, down from 5.3% in May.
Both figures were better than Street expectations.
The US central bank is still likely to raise rates at its July meeting but the expectation is this could be the last increase of this monetary tightening cycle.
A rate hike on July 26 remains the most likely outcome but the end of its hiking cycle is "in sight", Ebury analyst Matthew Ryan believes.
But in the UK, with inflation stuck at 8.7%, there remains plenty for the BoE to do to get the figure down to its 2% remit.
JP Morgan has warned rates could rise as high as 7% although the market is currently pricing in a peak around 6.5% compared to the current level of 5%.