While all the talk in the forex markets has been about the strong dollar, sterling hasn't been doing too badly either. True, it has drifted down to an 18-month low against the dollar, as investors expect interest rates to rise there before they do in the UK. (Higher rates make assets, and the currencies they are denominated in, more appealing.)
However, on a trade-weighted basis, it has hit its highest level since the summer of 2008. Against the euro, it has reached an eight-year high.
MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
One reason may be the fact that the general election is fast approaching. Politics can easily lead to plenty of turbulence the pound suffered a nasty jolt last year when a poll showed a lead for the "Yes" vote in the run-up to the Scottish referendum.
This time round, the uncertainty may last longer. Protracted horse-trading is a possibility as parties try to cobble together a coalition. Most of the likely election outcomes "point to a weaker sterling", says HSBC. Commerzbank's Peter Kinsella cites the prospect of a referendum on EU membership as a key worry.
One outcome of any vote to leave the EU would be a potential fall in foreign direct investment from Europe. That would make it much harder to fund the UK's current-account deficit.
-
Rightmove: Asking prices set to rise 2% in 2026 after post-Budget market reboundBuyers and sellers who held off in anticipation of the Budget will come back to the market and contribute to asking prices increasing next year, according to Rightmove
-
Coreweave is on borrowed timeAI infrastructure firm Coreweave is heading for trouble and is absurdly pricey, says Matthew Partridge
