Where next for the pound?

The pound’s rebound on foreign-exchange markets has been one of the most closely watched trends over the past few months. Sterling has jumped to a five-year high against a basket of major trading partners’ currencies on a trade-weighted basis (see chart).

It is at a two-and-a-half-year high of $1.64 against the US dollar, having gained more than 10% since last summer. Against the euro it has reached a 12-month high of €1.21.

The pound could now hurt growth by making exports expensive. The Bank of England worries that “any further substantial appreciation” could hamper the recovery. Clothing retailers [...]

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