Pound Reaches Highest Level Since Brexit Vote in 2016

The pound reached its strongest level since the 2016 EU referendum on Wednesday, according to Bank of England data released on Thursday. It was the highest reading since 23 June 2016, the day Britons voted on whether to leave the European Union.

The measure used is the Bank of England's sterling effective exchange rate index, which tracks the pound against a basket of other currencies rather than any single one. On Wednesday the index hit 86.5372. On this scale, 100 equals the value of the pound in January 2005. On the day of the referendum, the index stood at 87.9248, so the pound remains below that level. Its lowest point on the index was 73.1, reached on 23 March 2020, at the start of the Covid-19 pandemic.

Against the US dollar, the pound was flat on Thursday at $1.3463, after gaining more than half a cent on Wednesday. Against the euro, it traded at €1.1985 on Thursday. At the end of October it had reached an 18-month high of more than €1.20.

Bloomberg reported that the gauge's rise was supported by resilient UK economic data and expectations about interest rates. Reuters reported earlier in the week that the Bank of England, the country's central bank, was expected to raise its interest rate on Thursday, as higher energy costs weighed on the economy. A rate rise is a move to increase the cost of borrowing money, which the central bank uses to influence inflation.

The pound's position has moved considerably over the past year. In late August, Reuters reported sterling trading at $1.3632 against the dollar, while in the week before 28 September it had fallen to a three-month low of $1.3204.