The British pound has reached its highest level against a basket of major currencies since the 2016 Brexit referendum, according to the latest data from the Bank of England. The sterling effective exchange rate index (EERI) hit 86.4 yesterday, marking the strongest position since June 23, 2016, when the Brexit vote was announced.
The pound initially plummeted after the Brexit vote, hitting a 31-year low against the dollar. It faced further declines due to the Covid pandemic, the 2022 mini-budget meltdown, and several elections. However, the currency received a boost ahead of the Bank of England's interest rate decision today, which saw the rate rise to 4%, its first increase in over three years.
Despite the rate hike, the pound slipped 0.1% lower to $1.346 after the announcement. However, it had gained half a cent against the dollar the day before. Against the euro, the pound remained largely flat at €1.20, though it surged to an 18-month high against the single currency last month.
The pound's strength is partly attributed to the weakness of the dollar, which has been affected by the midterm elections and the Democrats' victory. The euro has also faced pressure due to concerns over France's fiscal position. The Bank of England's sterling effective exchange rate index (EERI) tracks the pound against a basket of 18 other currencies, with the index standing at 87.4 on the day of the Brexit vote before plummeting to as low as 73.1 during the Covid pandemic.