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Pound at highest level since Brexit vote

Sky News logo Sky News 12/01/2018
The new £1 pound coin is seen alongside US dollar bills and euro notes on April 4, 2017 in Bath, England © Getty The new £1 pound coin is seen alongside US dollar bills and euro notes on April 4, 2017 in Bath, England

The pound has climbed to its highest level against the US dollar since the Brexit vote.

Sterling was up by more than a cent to reach nearly $1.37 in Friday trading. It was little changed against the euro, hovering below €1.13.

It has not been as high versus the dollar since the result of the EU referendum in June 2016 sent the pound plunging from $1.50.

That result saw sterling sliding to less than $1.20 in ensuing months before steadily gaining back ground over 2017.

The latest rise on Friday was partly attributed to a report that Spain and the Netherlands were open to a softer Brexit deal for Britain.

Bloomberg reported that the two countries' foreign ministers had agreed to work together for a divorce deal that would maintain close ties between the EU and Britain.

That did little to help the pound against Europe's single currency, which was buoyed by signs that the European Central Bank was preparing to unwind its huge monetary stimulus, as well as a coalition deal in Germany after months of political uncertainty.

But sterling made up more ground versus the dollar, weakened by US producer price data that suggested inflation may not pick up as expected later this year.

The pound's weakness since the Brexit vote has had a major impact on the economy, because it has made the import of goods priced in euros and dollars more expensive.

That has filtered through to inflation, which recently reached its highest level for nearly six years, squeezing household finances at a time when wage growth is failing to keep pace with the rising cost of living.

A tougher time for households has meant a leaner spell for the consumer side of the economy, contributing to a slowdown in economic growth.

This has also been a factor in some of the pain felt by retailers over what for many has been a difficult Christmas period.

Sterling's weakness has been a help, however, to Britain's factories, as it makes their products more attractively priced for overseas buyers.

Watch: Second Brexit referendum 'not a good idea' - Finkelstein (Bloomberg)

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Official figures earlier this week showed manufacturing growth at its strongest level since 2011.

The latest upturn for the pound still leaves it about 9% lower than its peak just over 18 months ago.

But it could at least mean British tourists travelling to some overseas destinations will see their money go a little further on holiday than it would have done a year ago.

However, some analysts were unconvinced by the significance of the reports on the positions of Spain and the Netherlands.

Nomura currency strategist Jordan Rochester said: "I'm sceptical this is necessarily a game-changer at this stage as there will also be member states pushing the other way."

NOW SEE: Spanish and Dutch seek soft Brexit

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