The knock-on effects for families could see hundreds of pounds slashed off the price of summer breaks.
On a day of a wealth of good news on the financial markets, share prices soared, the pound hit a five-month high against the dollar and cost of living rises slowed dramatically.
Business and consumer confidence shot up during the last month, according to the latest figures, with some experts predicting that the worst of the recession is now over.
The bounce-back by the pound saw sterling break back through the 1.5 dollar mark. It also clawed back value against the euro, rising by almost 1per cent alone yesterday, to 1.13 euros.
The fightback has seen the pound rise dramatically against the euro in recent weeks.
Hard-hit families holidaying abroad in Europe can expect to pay about 10 per cent less than the start of the year. Breaks in the US have similarly become better value.
According to travel association Abta, Spain, France and the USA are now the top three overseas destinations for Britons.
Abta spokeswoman Frances Tuke said: “Obviously this will give people a bit more optimism that they will have some more money in their pocket when it comes to buying things abroad. Hopefully it means people will have that little bit more to splash around when it comes to meals and shopping. This is a bit of bright news in the gloom.”
Mike Greenacre, managing director of The Co-operative Travel, the UK’s biggest independent holiday retailer, said: “We have been watching the currencies carefully for the last three months and it is very pleasing to see positive movement.
“We anticipate this will have a very positive effect as we come into the late bookings market where our customers can see that their preferred destinations – over 40 per cent of our customers go to Spain – will be much more affordable.”
Yesterday’s good news for the travel industry instantly saw shares in British Airways surge 12 per cent while Thomson owner TUI Travel also saw theirs soar by 7 per cent.
Buoyed by trade abroad, the stock market rose 3 per cent with the FTSE passing the 4300 mark, adding £31billion to share prices. It ended the day at 4336.94, up nearly 100 points.
Market analysts were delighted at yesterday’s jump in trading which they described as very encouraging.
Tim Hughes, head of sales trading at IG Index, said: “The FTSE has remained positive throughout the day, although down from earlier highs. Today’s high has seen the FTSE trade at levels not reached since January 14 this year and represents a 1,000 point bounce-back from March lows.
“With more than a few people expressing this is the start of the next bull market, momentum has been positive over recent days, with investors piling in, worried about missing out on further recovery.”
There was also good news for hard-pressed families as the British Retail Consortium reported a fall in the rate of shop price inflation.
While annual food inflation remained historically high at 7.9 per cent last month, this was much lower than the 9 per cent in March thanks to a more stable pound, according to the BRC-Nielsen Shop Price Index.
Stephen Robertson, BRC director general said: “Heavy discounting left non-food goods nearly two per cent cheaper than a year ago and annual food inflation has slowed for the first time this year.
“With food cheaper than a month ago, the worst of food price inflation may be over, thanks to a more stable value for the pound.”
Clothing and footwear saw the biggest price falls in the non-food sector, down 7.1 per cent on a year ago, while electricals dropped 3.9 per cent.
In addition, consumer confidence rose at its fastest rate for two years during April as people felt more optimistic about the future of the economy, research showed today. Nationwide’s consumer confidence index rose by eight points to 50, the biggest monthly increase since May 2007.