Roseman on currencies: Whither the pound?

CURRENCIES

Once upon a time, the framework used to analyse exchange rates used to be relatively easy to understand.

If a country adopted a tight monetary stance combined with a weak fiscal stance, a currency would tend to appreciate. A weak monetary stance, or easy money, combined with a tight fiscal stance tended to lead to a weaker exchange rate. Obviously, several other factors had to be taken into account such as the level and direction of inflation, GDP growth and the political backdrop. But, by and large, it used to be relatively straightforward. That was once upon a time. Yet, as the Bank of England approaches the 15th anniversary of independence, one wonders how the market now evaluates the...