At a glance

• The British pound has reached its highest level since June 2016.
• The value index of the pound against a basket of 18 currencies rose to 86.4 points.
• The pound's exchange rate has exceeded 29 Czech crowns, compared with less than 28 at the start of the year.
• The Bank of England is set to raise its interest rate on Thursday, after more than three years without a change.

Strongest since the referendum

The Bank of England reported that the value index of the pound against a basket of 18 major world currencies rose to 86.4 points. This is the highest result since June 2016. The index uses 100 points from 2005 as its reference point (Libra je nejsilnější od referenda o brexitu – Novinky.cz). In recent weeks, the British currency has strengthened markedly against the dollar and the euro. At the beginning of the year, one pound bought less than 28 Czech crowns, and the rate has now exceeded 29 crowns.

Interest rate hike as the main factor

Analysts point out that the most important reason for the rise is the expectation of the Bank of England's decision. The bank is set to raise its key interest rate on Thursday, after more than three years without a change (Funt na najwyższym poziomie od referendum brexitowego. Brytyjska waluta zyskuje na sile – bham.pl). Higher rates usually attract foreign capital, which supports the currency's exchange rate.

The economy and relations with the EU

Former Minister of Trade and Investment Jim O'Neill, quoted by the BBC, assessed that many observers had underestimated the improvement in the British economy. In his view, its momentum is better than assumed. The gradual rapprochement between London and Brussels is also affecting investor sentiment. The agreements are meant to make travel and study easier for young people and to reduce some trade barriers.

Implications for businesses

A stronger pound favours purchases abroad, but makes it harder to sell British goods and services in markets where payment is made in other currencies. For Polish entrepreneurs operating in the United Kingdom, this means a change in import costs and in revenues converted into złoty.