Sterling has matched its highest overall level since the June 2016 Brexit referendum, ahead of a Bank of England decision widely expected to deliver the first interest-rate rise in three years.

The Bank’s closely watched index measuring the pound against a basket of 18 major currencies reached 86.4 this week, its joint highest reading since the vote. The index uses 2005 as its baseline of 100. Official confirmation of the calculation is due on Thursday.

The milestone reflects a broader recovery rather than a high against every individual currency. Sterling has gained notably against both the euro and the dollar in recent weeks, although their latest movements were mixed. At 04:15 GMT on Thursday, the pound was up 0.13% against the dollar at $1.3495 and down 0.16% against the euro at €1.1979.

Some traders see a reassessment of Britain’s prospects, pointing to relative political stability, solid growth and improving relations with the European Union. Those explanations sit alongside expectations of higher interest rates; the currency’s rise alone does not establish the contribution of each.

Jim O’Neill, the economist and former Treasury minister, said people had underestimated, and to a lesser extent continued to underestimate, the UK’s improving momentum.

The recovery follows a substantial fall after the referendum and further lows during the Brexit process, the Covid pandemic and the 2022 mini-Budget. Sterling has proved sensitive to Brexit developments and political uncertainty throughout that period.

For consumers, a stronger pound can increase spending power on imported goods and overseas holidays, while helping to restrain inflation. Yet the economic picture is not uniformly stronger: growth this year has exceeded all forecasts, but there are signs that higher energy and fuel prices have dented consumer confidence.

The Bank’s nine-member Monetary Policy Committee meets on Thursday with a rate rise widely anticipated, but not yet decided. Sterling’s milestone therefore comes before, rather than as a result of, that decision.