The pound has reached its highest overall level since the Brexit referendum, with sterling strengthening against the euro and the dollar in recent weeks as markets anticipate an increase in UK interest rates.
The Bank of England’s measure of the currency’s value against a basket of 18 major currencies reached 86.4 this week, its joint highest level since the June 2016 referendum. The index uses 100 to represent the value in 2005. The Bank is due to confirm the calculation on Thursday.
Sterling fell sharply after the referendum and hit further lows during the Brexit process, the Covid pandemic and the 2022 mini-Budget. Traders cited relative political stability, solid growth and closer relations with the European Union as factors behind a change in how the UK is viewed.
Jim O’Neill, an economist and former Treasury minister, said he was not surprised by the rise, adding that people had underestimated the improving momentum in the UK.
A stronger pound can help contain inflation and increase consumers’ purchasing power for imported goods and holidays. UK growth has exceeded expectations so far this year, although higher energy and fuel prices have begun to weigh on consumer confidence.
The Bank of England’s nine-member Monetary Policy Committee is due to decide on interest rates on Thursday. Its first increase in three years is widely expected.
Sources: BBC News UK.