By Fatma Younis
The British pound has reached its strongest level against a basket of major currencies since the 2016 Brexit referendum, according to Bank of England data released Thursday.
Sterling's recovery after years of volatility
The Bank's sterling effective exchange rate index (EERI) hit 86.4 on Wednesday, the highest since June 23, 2016, when the index stood at 87.4 before the Brexit vote result was announced. The index had slumped to a low of 73.1 in March 2020 during the Covid pandemic. On this index, 100 represents the pound's value in January 2005.
Interest rate decision and dollar weakness
Sterling had been boosted ahead of the Bank of England's interest rate decision on Thursday, with markets anticipating a hike to 4%, the first increase in more than three years. The pound slipped 0.1% to $1.346 shortly after the rate rise, but had gained half a cent against the dollar on Wednesday. Against the euro, the pound remained largely flat at 1.20 euros, though it surged to an 18-month high last month. Part of the pound's strength stems from dollar weakness following the U.S. midterm elections and a Democratic victory, while the euro has been pressured by concerns over France's fiscal position.
