Why the pound may continue to surprise

Article Abstract:

Many of the arguments currently being put forward to suggest that the value of the pound will decline are not really justified. It is widely accepted that sterling is overvalued, but this does not necessarily mean that its value will fall. The trade deficit may not widen as much as expected, and this could keep the pound high. The launch of the European single currency is just as likely to keep sterling strong as to weaken it, as this development is still surrounded by considerable uncertainties.

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On the line

Article Abstract:

The Bank of England's forecasts are published in its Inflation Reports, issued every three months. The report is important in reflecting the type of advice likely to be given the UK chancellor. The bank is handicapped in making forecasts since interest rates and exchange rates cannot be predicted easily. The bank takes account of a wide range of factors, and argues that this is necessary since factors not previously seen as important may come to carry more weight as the economy changes.

Commercial Banking, State commercial banks, State Banks, Banking industry

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Heading for a fall?

Article Abstract:

The Bank of England has warned of a possible fall in sterling due to the rising current account deficit. Any decline in sterling cut hit equities. However, the most likely reason for a fall in sterling is not the current account deficit, but the fact that sterling is just too high at present.

Foreign exchange, Foreign exchange rates, Monetary policy

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