Pound index matches highest level since 2016 referendum

The pound’s trade-weighted index reached 86.4 this week, matching its highest level since June 2016, as sterling strengthened ahead of a Bank of England interest-rate decision announced on Thursday, November 5. The index measures the currency against 18 trading partners and uses 100 as its 2005 base, leaving the latest reading below that benchmark. In early Thursday trading, sterling was at $1.3495, up 0.13%, and at €1.1979, down 0.16%. The dollar rate had also reached $1.3495 on Wednesday, when it was reported up 0.63% from its previous level. The figures reflect observations at different times. The trade-weighted index offers a broader measure than either exchange rate because it weights currencies according to the United Kingdom’s trading relationships. The Bank of England’s nine-member Monetary Policy Committee voted 8-1 to raise Bank Rate from 3.75% to 4%, the first increase since August 2023. One member preferred a larger rise to 4.25%. Higher rates can support a currency by increasing the appeal of assets denominated in it, although the effect also depends on expectations for future policy and what markets have already priced in. Market participants have also pointed to...