Ed Conway, Sky News’s economics editor, tweets this morning that sterling has notched up a dubious record – it stands out as the worst-performer of all major currencies over the past 24 hours, month, three months and 12 months. But does that matter? Yes, if you are about to go on a foreign holiday. Take a longer view, however, and you might conclude that a weak pound might be rather a good thing.
The most obvious point about a sinking currency is that it makes the country’s exports cheaper in global markets and makes imports more expensive. It thus helps to boost production while simultaneously helping to switch consumers towards home-produced goods. Living standards might fall in the short term, as foreign holidays and imported goods become more expensive, but in the longer run it should help to boost the economy.
Yet there is another reason to welcome a fall in sterling.
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