Sterling smashed through
The pound has now risen nearly 15pc against the US dollar and more than 9pc against the euro since its recent lows below
Sterling's dramatic recovery over the past year is good news for Britons travelling abroad this summer, with the pound now buying far more than it did a year ago.
Tourists, of course, do not get the rate quoted on foreign exchange markets when they swap their pounds for dollars, euros and other currencies. But someone changing
But he warned that it will also 'squeeze'
The strengthening pound has caused alarm among
And it is not just against the dollar and the euro. The pound is up 23pc against the Turkish lira in the past 12 months, 16pc against the Russian rouble and South African rand, 14pc against the Thai baht and 11pc against the Brazilian real.
'It is certainly the case that manufacturers are monitoring exchange rate developments more closely than at any time over the past five years,' said
However, just as there was no noticeable pick-up in exports following the sharp fall in sterling during the Great Recession of 2008 and 2009, manufacturing has performed strongly over the past 12 months.
Official figures last week showed factory output rose 2pc between February and April, the strongest three-month performance since the Coalition came to power in
'The modern economic environment in which firms now operate is very different from the standard textbook model of weaker sterling equalling higher exports and vice versa,' said Prothero, pointing to increasingly globalised supply chains and offshore production.
'There is an argument that the
'But the question facing policymakers and exporters alike is if the sharp depreciation in 2008 didn't support much of an export revival, how much of an impact is being felt from the recent strengthening of sterling?'
The Bank of
Officials reckon the rise in sterling in the past 12 months has helped drag inflation down to a four-and-a-half-year low of 1.5pc by making it cheaper for
'The appreciation of sterling over the past year or so meant that import prices were probably starting to pull down inflation,' said the minutes of this month's meeting of the monetary policy committee.
BUT the Bank, which rarely comments on the exchange rate, has also suggested the strength of sterling could force it to leave interest rates lower for longer if it hampers efforts to rebalance the economy towards exports.
The rebound in sterling over the past year has been driven by the recovery in the
Until recently, it was widely thought that the Bank would raise rates at some point next year, having held them at 0.5pc since
But Bank governor
The prospects of a rate rise before the end of the year have bolstered the pound at a time when the euro and dollar have come under pressure from more dovish positions at the
The ECB cut one of its key interest rates into negative territory earlier this month while the Fed is expected to leave rates unchanged until well into 2015.
'It is a given that the
'Talk now seems to be of further sterling strength, but at the same time it is best not to get carried away,' he said.
'At some point the US will start to hike rates too.'
In the meantime, however, growing international confidence in the
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