Key facts
- The Bank of England's index for sterling reached 86.4, where 100 equals the currency's 2005 value.
- The Bank is due to officially confirm the index calculation on Thursday.
- The Bank's nine-member Monetary Policy Committee meets on Thursday, with a first rate rise in three years widely expected.
- Economist and former Treasury minister Jim O'Neill said people had been underestimating the improving momentum in the UK.
The pound has risen to its joint highest level against a basket of 18 major currencies since the June 2016 Brexit referendum, according to Bank of England figures. The trade-weighted index reached 86.4, on a scale where 100 equals sterling's value in 2005. The Bank is due to officially confirm the calculation on Thursday.
Sterling has risen in recent weeks against both the euro and the dollar ahead of an expected rise in interest rates. The currency fell significantly after the 2016 referendum and reached further lows during the Brexit process, the Covid pandemic and the 2022 mini-Budget.
Some traders said the UK was being seen in a different light given relative political stability, solid growth and the rapprochement with the European Union. Jim O'Neill, an economist and former Treasury minister, said: "I'm not surprised. People were, and to a lesser extent, are, underestimating the improving momentum in the UK."
A stronger pound can help rein in inflation and increase buying power for consumers on imports and on holidays. UK growth so far this year has outperformed all expectations, but there are signs that higher energy and fuel prices have now hit consumer confidence. The Bank's nine-member Monetary Policy Committee faces a decision on interest rates on Thursday, with the first rise in three years widely expected.