The pound value post-Brexit high came this week, with sterling reaching its strongest overall level since the June 2016 Brexit referendum, according to Bank of England figures. The move matters because a firmer currency can ease import costs and improve buying power for holidays, even as the Bank of England weighs rates on Thursday.
86.4 was the figure the Bank of England gave for the most-watched measure of sterling against a basket of 18 major currencies, on an index where 100 equals its 2005 level. The Bank of England will officially confirm the calculation on Thursday, the same day its nine member Monetary Policy Committee faces an interest rate decision.
Jim O'Neill on UK momentum
“I'm not surprised.” Jim O'Neill, the economist and former Treasury minister, used those words to describe the rise. “People were, and to a lesser extent, are, underestimating the improving momentum in the UK,” he said, pointing to a shift in how the UK is being judged.
0.13% was the pound’s gain against the dollar at $1.3495 at 04:15 GMT on Thursday, while it was 0.16% lower against the euro at €1.1979. That split shows sterling is not rising in a straight line: it has strengthened notably in recent weeks against the euro and the dollar, yet it still gives up ground against one of them on the morning of the Bank of England decision.
Bank of England rates and sterling
3.75% is the level analysts expect the Bank of England to leave behind if it raises rates to 4%, which would be the first increase in more than three years. Because the Bank of England rate guides mortgage, loan and savings rates for millions, the decision reaches far beyond currency traders and into household cash flow.
UK growth so far this year has outperformed all forecasts, but higher energy and fuel prices have now hit consumer confidence. Some traders say that mix has put the UK in a different light because of relative political stability, solid growth and rapprochement with the European Union, yet the euro move shows the case for sterling is not cleanly one-way. How long the pound’s recent strength lasts now turns on whether Thursday’s rate move and the pressure on consumer confidence pull in the same direction.
