Pound hits joint-highest level since Brexit referendum ahead of BoE rate decision

Sterling at its strongest since the Brexit vote

Sterling has risen notably against the euro and the dollar, ahead of an expected rise in UK interest rates. The Bank of England's measure of the pound against a basket of 18 of the world's main currencies reached 86.4 in its latest calculation (100 is the 2005 value), a joint high since the June 2016 referendum. The calculation is due to be formally confirmed by the Bank on Thursday, 5 November. Sterling fell sharply after the 2016 vote and sank further during the Brexit process, the Covid pandemic and the 2022 mini-Budget.

Why the pound is gaining

Some traders said the UK is now viewed differently, given calmer politics, solid growth and closer ties with the European Union. Jim O'Neill, an economist and former Treasury minister, said he was not surprised by the rise.

“I'm not surprised. People were, and to a lesser extent, are, underestimating the improving momentum in the UK”

UK growth so far this year has beaten all expectations, though higher energy and fuel prices have now hit consumer confidence. A stronger pound can help restrain inflation and raise consumers' purchasing power for imports and holidays abroad. The Bank's nine-member Monetary Policy Committee faces its rate decision on Thursday, 5 November, with a first rise in three years widely expected.

Services sector returns to hiring

The S&P Global UK services PMI rose to 52.8 in October from 52.1 in September, a seven-month high and the strongest reading since February, before the escalation of the US-Israel war with Iran. Any reading above 50 signals expansion. Firms took on additional staff in October as workloads grew, ending two years of continuous job cutting across the sector. Some firms credited customer spending on artificial intelligence investment for higher sales.

September 202652.1

October 202652.8

September 2026

52.1 index

October 2026

52.8 index

Data from the article text

Tim Moore, economics director at S&P Global Market Intelligence, said hiring had renewed but only marginally.

“the pace of job creation was only marginal as firms noted efforts to control costs and prioritise efficiency gains where possible”

Inflation and the rate decision

New research finds UK interest rates are not curbing inflation as much as the Bank of England had assumed, which strengthens the case for a rate increase ahead of the Monetary Policy Committee's meeting on Thursday, 5 November. A new Bank of England inflation gauge, the sticky-central measure, shows little sign yet that UK price pressures are building. That offers some comfort to rate-setters weighing the decision.

Euro-zone wage growth set to slow

The ECB's wage tracker, published on Wednesday, 4 November, predicts that salaries will rise by an annual 2.4% between July and September 2027. The slowdown would be encouraging news for the European Central Bank as it battles inflation driven by the Iran war.