How much longer before the artificially high pound peaks? When it falls watch inflation soar! Labour wont know what has hit them! Better hurry up and call that election Mr Brown!

From The Times:

Sterling and oil advance into record territory
The pound is worth $2.04, a 26-year high.

It is dollar weakness not pound strength. Check the cross rates to the euro ect. The pound has been in a narrowing range againt them for years.

DavidBodden, The Labour government has been deliberately working to keep the pound high to mask inflation which experts say is really running at 7%. Watch how events unfold and when the pounds strong position can no longer be maintained, you will see the true rate of inflation rocket upwards and the Bank of England forced to raise the cost of borrowing again and again. If inflation is as low as the governments doctored figures show, why is the Bank of England so worried?

French President Nicolas Sarkozy has said several times that the Euro is overvalued, Sarkozy is so worried by this he even wants the Euro devalued, so how can the Euro be responsible for the pounds strength?

Tony, you complain about the ‘pound strength’ and want devaluation, but fear the inflation that it would bring. You then quote Sarkozy also lamenting the euro / USD exchange rate. The common factor here is the US dollar. In fact cast the net further and look the US Dollar index which is a weighted average of the euro, Japanese yen, British pound, Canadian dollar, Swedish krona, and Swiss franc. Look at this chart. http://charts3.barchart.com/chart.asp?jav=adv&vol=Y&grid=Y&org=stk&sym=%24DXY&data=H&code=BSTK&evnt=adv It shows the weakening of the USD against all of them.

Devaluing the pound to make our exports more competitive is a failure of a policy that belongs in the past.

DavidBodden, I've never called for a 1967 style devaluation. All I ask is that the pound is allowed to operate at its natural equilibrium. I quoted Sarkozy to illustrate the point that the Pound isn't strong on account of the Euro being weak as you indicate.

Its true that some countries have devalued their currencies to kick-start growth, but we all know they will pay for it in the long run with inflation. However I do not advocate such an approach. Rather I should like to see Sterling operate at natural market-driven levels.

New Labour's economic one-card-trick, The strong pound, has bailed them out of having to address the underlying high level inflation which has been fuelled by government spending and cheap credit. However the days of relatively low interest rates and low inflation are soon to end. I predict full blown stagflation. The pound can't stay strong forever and Gordon Brown knows this, that factor alone may well determine when Brown calls the next election.