Pound hits highest level since its crash after 2016 Brexit vote

Ten-year high shows sterling’s strength against other currencies following fall of dollar after US midterm elections

The pound has hit its highest level since its crash in the wake of the Brexit referendum a decade ago.

Data released by the Bank of England on Thursday showed that the pound reached its strongest level against a basket of other currencies since 23 June 2016 – the day of the EU vote – on Wednesday.

This follows the drop in the value of the US dollar after the midterm elections, but also reflects the pound’s recent strength against other currencies such as the euro and the yen.

The pound has also benefited as the Bank of England raised interest rates for the first time in more than three years on Thursday, which would make it more lucrative for investors to hold funds in sterling.

The dollar weakened in the aftermath of the Democrats’ victory on Wednesday, amid a risk-on rally that led to money flowing into other currencies.

Jim Reid of Deutsche Bank said: “When it came to the market reaction, there was relief among investors that the results weren’t disputed, which helped to reduce political uncertainty.

“Moreover, the prospect of divided government also eased concerns about the fiscal trajectory, given it’ll now be more difficult to pass tax cuts or spending packages.”

The pound’s 10-year high was published by the Bank in its sterling effective exchange rate index (EERI), which tracks the pound against a basket of other currencies.

Calculated by the Bank of England, this index has now hit 86.5372. On the index, 100 equals the value of the pound in January 2005.

In 2016 the pound hit a 31-year low against the dollar in the hours after the Brexit vote. That pulled the EERI down to 84.441 on 24 June 2026, down from 87.9248 on the day of the referendum. The EERI fell as low as 73.1 on 23 March 2020, in the Covid pandemic.

On Thursday the pound was flat against the dollar at $1.3463, having gained more than half a cent on Wednesday. Against the euro, sterling was slightly lower at €1.1985, having hit an 18-month high over €1.20 at the end of October.

European stock markets also rose on Thursday morning. The FTSE 100 and Germany’s Dax were up 0.6%, while France’s Cac 40 advanced 0.8%, following US markets higher after Donald Trump’s defeat in the midterms.

Ajith Nair, the chief investment officer of Isio Investment Management, said: “The immediate reaction has clearly been positive and provides some welcome respite after the recent wobble in AI-related stocks.

“Markets appear to be taking comfort from the idea that the election result means the Trump administration will face greater constraints in pursuing some of the more disruptive parts of its policy agenda over the final two years of the presidency.

“That may ultimately prove correct, but investors should be careful about getting too comfortable with that assumption. A more challenging Congress does not mean the president is powerless, particularly when it comes to trade and foreign policy.

“If markets are effectively betting on two relatively uneventful years from Washington, that assumption could still be tested.”