pound highest level since Brexit — The pound has reached its strongest overall position since the Brexit referendum more than a decade ago, according to Bank of England data, with the currency’s broad value hitting a level last seen in the aftermath of the June 2016 vote.
The Bank’s trade-weighted index, which tracks sterling against a basket of 18 major currencies, climbed to 86.4 this week, matching its joint highest reading since the referendum. The Bank is due to confirm the figure on Thursday.
Rate expectations drive momentum
Expectations of an imminent interest rate increase have been a key factor behind the rally. The Bank’s nine-member Monetary Policy Committee meets on Thursday, and the first rate rise in three years is widely anticipated. Higher rates tend to support a currency by attracting yield-seeking capital.
Against the dollar, sterling was up 0.13% at $1.3495, while it slipped 0.16% against the euro to €1.1979 in early Thursday trading.
Recovery from a decade of setbacks
The pound’s path since 2016 has been far from smooth. Sterling fell sharply after the referendum result and suffered further declines during the protracted Brexit process, the Covid pandemic and the 2022 mini-Budget. Those episodes repeatedly tested investor confidence in UK assets.
More recently, however, traders have pointed to a shift in how the UK is perceived. Relative political stability, solid economic growth and improved relations with the European Union have all contributed to a more favourable backdrop for the currency, according to market participants.
Growth outperforms forecasts
UK growth has outpaced all forecasts so far this year, adding to the case for a stronger pound. Still, there are signs that rising energy and fuel prices have begun to weigh on consumer confidence, suggesting the economic is not uniformly bright.
Jim O’Neill, an economist and former Treasury minister, said he was not surprised by sterling’s advance, noting that observers had been underestimating the improving momentum in the UK, though he suggested that underestimation persists to a lesser degree.
Mixed benefits for households
A stronger pound can help restrain inflation and boost consumers’ purchasing power on imports and foreign holidays. For households facing elevated energy bills, however, the currency’s gains offer limited immediate relief.
The index reading of 86.4 compares with a baseline of 100, which represents the currency’s value in 2005. Sterling’s move to its joint highest level since the referendum marks a notable turnaround for a currency that has spent much of the past decade under pressure.
