By Salma El-Sakka
The British pound has risen to its highest overall level since the June 2016 Brexit referendum, according to Bank of England figures released this week.
Sterling's Recovery
The trade-weighted index, measuring sterling against a basket of 18 major currencies, reached 86.4 on a scale where 100 equals the 2005 value, matching a joint high last seen before the Brexit vote. The Bank will officially confirm the calculation on Thursday.
Rate Decision Looms
Sterling has strengthened notably against both the euro and the dollar in recent weeks, driven by expectations of an interest rate increase by the Bank of England's Monetary Policy Committee, which meets on Thursday for the first rate rise in three years.
The currency's recovery follows significant declines after the referendum, during the Brexit process, the Covid pandemic, and the 2022 mini-Budget. Traders attribute the recent gains to improved political stability, solid economic growth, and a rapprochement with the European Union.
Economist and former Treasury minister Jim O'Neill said the improving momentum in the UK had been underestimated. A stronger pound can help curb inflation and boost consumers' purchasing power for imports and travel.
While UK growth has outperformed expectations this year, rising energy and fuel prices have begun to dent consumer confidence, adding complexity to the Bank's policy decision.
