If this fall is to offset the intervening interest rate return, the decline needs to start from somewhere in the DM2.90s; which is where sterling has obediently been sitting.Interest rate expectations are, however, fickle things, and in the context of a reviving European economy and a slowing UK one, investors have roving eyes. The trade-weighted exchange rate is 22 per cent higher than two years ago; a considerable shift, even for an economy proud of its “flexibility”. Certainly, a rising currency does not necessarily imply a loss of competitiveness. A postwar upwardly mobile DM did not – at least, not until the 1990s ! – consistently knee- cap German industry, since low unit cost inflation held the real exchange rate relatively stable.Sadly for all concerned, the strong pound circa 1998 has been a function not of relatively low but of relatively high inflation. To the Rover exporter, the pound is undoubtedly and perhaps irrationally overvalued.

UK plc may be flexible, but it is not Houdini; and while the restructuring prompted by a sharp sustained real appreciation produces a leaner corporate base by definition (since the flabbier companies go to the wall), the accompanying job losses and the interim reduction in investment and R&D render it a less than ideal fitness programme.Is sterling overvalued, however? Yes, if you are selling Rovers; no, on the OECD’s measure of Purchasing Power Parity (which equates prices of traded goods); perhaps, on estimates of Fundamental Equilibrium Exchange Rates (which attempt also to incorporate capital flows); yes, on the Economist magazine’s “Big Mac” index (based on the prices of that most standardised of consumer products).Let us just say that the currency looks a little top-heavy. Adjust for inflation, and that 22 per cent rise in the nominal pound since mid-1996 turns into a 32 per cent rise in the real exchange rate. The “alternatives” will tend to move together, and against the euro, simply because they are precisely that, alternatives.When concerns about EMU and Asia pushed up the dollar this year and last year, they naturally did the same to sterling; and a succession of interest rate increases from the newly independent Bank of England, ensured that the pound never trailed too far behind its transatlantic big brother.Stability against the dollar is, however, of limited comfort to UK exporters, over half of whose sales go to the EU, and who then compete with Europeans for the 13 per cent sold to North America. Just how strong, however, is the pound? And how low might it – or might the Bank of England prefer it not to – go? The answer, as always, depends on how you ask the question.
Since August 1996, when sterling found its present set of wings, the pound has risen 25 per cent against the DM but only 5 per cent against the American dollar. Sterling has traditionally clung closer to the dollar’s coat-tails than the DM’s, though this is arguably now as much a symptom as a justification of Britain’s “semi-detached” European status.

For investors, sterling, like the dollar and the Swiss franc, offers an alternative to the euro-bloc. As sterling’s only consistent feature has been its inconsistency, should businesses now be bracing themselves for the sterling roller coaster to head down again? Not, it is clear, if the Bank of England has anything to do with it. A lower pound was cited by the Monetary Policy Committee as one of the reasons behind its June interest rate rise. It is the path that builds economic strength, personal independence and responsibility – a stronger society – and leads to lower taxes.This is what Conservatives stand for. And as the politicians leave Westminster, we know one thing for sure The great battle of political ideas is just beginning.. WITH STERLING falling again on the markets, ahead of Wednesday and Thursday’s meeting of the Monetary Policy Committee, and the CBI and the unions demanding with one voice that it should be lowered as soon as possible if British exports are to remain competitive, the nation’s currency is once again at the centre of economic debate. These bishops believe that “the Church should accept and support or bless monogamous covenant relationships between homosexual people and that they may be ordained” This time the word which jumps out is “covenant”.

Knowing that the bishops don’t like to be explicit, what do they really mean?In the Bible a covenant is an engagement entered into by God with a person or nation, for instance with Moses, and with the tribes of Israel, the chosen people. In the New Testament it is the engagement with God entered into at baptism In civil law it is a promise having legal validity. In light of these definitions, there is no need to make any further guesses; what is meant is that the Church should be prepared to conduct ceremonies of marriage between homosexuals, that is to “bless” such unions.The saving grace of the document, however, is not the analysis but a charitable statement that cleans away the stain of homophobia: “there are among us persons who experience themselves as having a homosexual orientation… And in describing the commandments upon which “hang all the law and the prophets”, Christ gave only two: “thou shalt love the Lord thy God with all thy heart” etc and “thou shalt love thy neighbour as thyself”. I now expect to see this matter satisfactorily resolved by the time of the next Lambeth Conference – in 2008.. TO HEAR some commentators, you would think that the last few years had seen a fundamental realignment of British politics It used to be all so simple There were two ways. There was the First Way – the idea that the state, over time, should do less That was – and is – our way.