KEY TO the films about boxer Rocky Balboa is the ability to triumph in the face of overwhelming opposition. The litany of bad news and adverse developments thrown at the UK recently invites comparison between Stallone’s character and sterling. After a relentless pummelling that no normal human could survive, Balboa eventually prevailed – could the pound do the same?

The challenges against the UK (and sterling) are legion. We have fallen out with our largest trading partner, which seems minded to react spitefully; our external account imbalance is among the worst on the planet; inflation is rising - against the global trend; and our executive is rapidly disintegrating. That the UK will emerge stronger from these challenges might seem to be the stuff of fiction, although this is not a scenario to be hastily dismissed.

Behind all the headlines it is easy to forget the positives, but the UK labour market remains the envy of many and certainly most of Europe. The unemployment rate in the UK is 4.6 per cent, which compares with 9.3 per cent across the eurozone, while the market’s flexibility is what France’s new president Emmanuel Macron seeks to emulate.

Exchange rates are naturally self-adjusting - if currency falls do not become destructive, the competitiveness of domestically produced goods and services eventually improves. This delivers a powerful rebalancing force for the domestic economy, leading to a natural improvement in the external accounts. Apart from the South African rand, the pound is now the cheapest tradable currency. Based on data for the last quarter of 2016, the UK’s current account deficit, as a proportion of GDP, halved.

Currently we buy more from Europe than we sell to it. When all the chest-puffing is done, it would be folly for the bureaucrats to deliver a separation deal that harms German exporters and their like. Politically, Europe might need to create the appearance of hardship as a discouragement to other disgruntled members of the EU. The reality can be quite different and fudges are common. Think back to the Maastricht budget deficit criteria with which few - not even Germany - complied.

After shaking off the shock result of last year’s Brexit referendum, the UK economy confounded siren warnings and grew at a faster rate than most other major nations. While it has not had a great start to 2017, growing by only 0.3 per cent, this too could have a silver lining. Across the world, appetite to bolster demand solely by changes to monetary policy – some conventional, others less so – is waning. The message to the Government from the recent general election is that the electorate want the current degree of belt-tightening to end. A looser fiscal stance is inevitable and can, crucially, be constructive.

On prices, global trends remain disinflationary – think about oil prices capped by over-production and all the internet-enabled disruptors. The Bank of England could be misled by the apparent insensitivity of the US economy to higher interest rates and lift its own base rate. Despite the recent split decision by the Monetary Policy Committee, under Mark Carney’s leadership this temptation is likely to be resisted. UK inflation surged in the aftermath of the financial crisis, only to subside just as quickly. The same pattern is in prospect.

In the Rocky films, there came a point when the hero was on his last legs, about to collapse in a heap. To many, the UK is reaching a similar position. Against the odds, Balboa was able to turn apparently unavoidable defeat into victory. Similarly, it is premature to sound the death knell of the UK economy. It is interesting that the pound has, despite apparently worsening events, found it hard to fall afresh.

The demise of our economy may already be all in the price. As with Rocky, it could be dangerous to write off the UK.

Stephen Jones is chief investment officer at Kames Capital.