After a long period out of the spotlight, the exchange rate is once again featuring strongly in the economic debate. There are two aspects to the renewed interest in the pound. First, sterling’s 10% drop against the recovering euro has arguably removed one of the largest practical hurdles to UK entry into the single currency. In old money, the pound is now at the equivalent of just 2.80 against the Deutschmark, its lowest level since 1998 and close to the bottom of its trading range in the Exchange Rate Mechanism (ERM).
