THE pound set another four-year high against the US dollar yesterday, cheering holidaymakers and shoppers but posing a problem for attempts to rebalance growth with a focus on manufacturing and exports.
Sterling’s recent strength has contributed to low inflation as it means imports are relatively cheaper in shops, while it also means UK tourists can get more for their money when travelling abroad. However, the ongoing struggle to revive the beleaguered manufacturing sector will not be helped by key export markets finding that goods stamped with the Made in Britain label are ever more expensive. The pound climbed to 1.68 US dollars at one point, the highest level since late 2009, though later fell back a little.
It came as a Rightmove survey showed house sellers’ asking prices had seen their biggest year-on-year jump since 2007.
The Bank of England, led by Governor Mark Carney, has said it is keeping a watchful eye on the property market for signs of overheating that could create an unsustainable bubble.
The latest signs of buoyancy will have done nothing to dampen City speculation that policymakers will want to hike interest rates from their current historic low of 0.5 per cent sooner than thought.
Policymakers also upgraded their forecasts for the UK’s economic growth, further bolstering sterling.