Sterling reaches strongest level since 2016 referendum-day crash

Sterling has reached its strongest level against a basket of currencies since the day of the 2016 EU referendum, when it began a sharp decline. The rise reflects a weaker US dollar after the Democrats’ midterm election victory, alongside the pound’s gains against currencies including the euro and yen; investors also appear more positive about closer UK ties with Europe.

The Bank of England’s sterling effective exchange rate index stood at 86.5372, compared with 87.9248 on referendum day and a low of 73.1 in March 2020. On Thursday, sterling was little changed against the dollar at $1.3463 and traded near an 18-month high above €1.20. Markets were also anticipating an interest rate rise by the Bank of England, while the UK and EU are expected to announce new trade deals at a summit later this month.