Wrong encoding when reading file in Python 3?

Question

When I read a file in python and print it to the screen, it does not read certain characters properly, however, those same characters hard coded into a variable print just fine. Here is an example where "test.html" contains the text "Hallå":

with open('test.html','r') as file:
    Str = file.read()
print(Str)
Str = "Hallå"
print(Str)

This generates the following output:

hallå
Hallå

My guess is that there is something wrong with how the data in the file is being interpreted when it is read into Python, however I am uncertain of what it is since Python 3.8.5 already uses UTF-8 encoding by default.