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A stronger pound means an even more unbalanced economy

Posted on 16 May 2014

“A Britain carried aloft by the march of the makers”. So George Osborne, the chancellor of the exchequer, used to describe his vision for the economy. The plan was for a revival in manufacturing and exports, driven, at least in part, by a weaker pound. Sterling had fallen by 30% during the financial crisis as traders bet that Britain, with its large financial sector, would be hit harder than most countries.
But since early 2013 the pound has climbed back, appreciating by 10% in trade-weighted terms (see chart). In some ways this is splendid news. It reflects the strength of GDP growth in Britain, which is now the strongest in the G8, as well as the expectation that interest rates will rise sooner as a result. Sterling looks like a relatively safe and stable storehouse for foreign cash as emerging markets wobble. But what does it mean for the British economy?……………………………………….Full Article: Source


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