STERLING's strength against the euro and weakness versus the dollar represent an "unappetising" mix for UK companies, a senior economist has declared.
Howard Archer, chief UK economist at consultancy IHS Global Insight, sounded the note of caution after the pound's recent climb to a seven-year high versus the euro and sterling's drop to its lowest level since 2010 against the US currency.
The pound fell as low as $1.4699 on Friday. And the euro dropped as far as 70.145p on the foreign exchanges last week.
Mr Archer highlighted the fact that sterling weakness against the US currency tended to push up input costs for UK companies because the prices of oil and other commodities were denominated in dollars.
And sterling strength against the euro crimps UK companies' competitiveness in export markets in the single currency zone.
Mr Archer said: "The weakness of the pound against the dollar does help UK exporters selling to the US and countries whose currency is linked to the dollar. However, the US accounts for around 15 per cent of UK exports, while the eurozone accounts for around 50 per cent."
He added: "Current mounting signs of eurozone economic recovery [are] very good news for UK exporters, but the benefits of this risk being significantly diluted by the pound's strength against the euro."
The euro has been hit by the European Central Bank's quantitative easing programme, and by worries over Greece.
Mr Archer noted that the dollar had been boosted by the "recently-heightened market belief that the Federal Reserve will start hiking US interest rates in June".
He added: "Some independent weakness of sterling against the dollar is coming from belief that the Federal Reserve will now hike interest rates markedly earlier than the Bank of England - a view that was reinforced by Bank of England Governor Mark Carney indicating in a speech last week that the bank needs to take the strength of sterling and very low inflation outside the UK into consideration when looking at its interest-rate decisions."
The pound recovered a small proportion of its recent heavy losses against the US currency today, rising by more than one cent to $1.4844. The euro edged up against the pound, to 71.52p from its pre-weekend close of 71.35p.
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