Sterling rock-solid, says guru

THOSE urging Britain to join the euro to end 'currency instability' are mistaken, top economist Stephen Lewis has warned. He said sterling has been much more stable than the euro since the single currency was launched in 1999.

Tony Blair was the latest to trot out the 'stability' case for the euro at last week's TUC conference. Lewis said the Prime Minister 'seems to be living in the past'.

Since the euro arrived, 'the pound has enjoyed its longest period of stability in recent times', insisted Lewis, of Monument Derivatives. He said sterling, adjusted to reflect Britain's trading relationships, has moved in a 3% band on either side of 107 since 1999. 'The euro, in contrast, has moved over a 20% range.' The average year-on-year change is 2.7% for the pound, 5.1% for the euro.

Europhiles may argue that sterling is steady because it is expected to join the euro. Lewis said this is 'not very plausible' because the pound is trading well above its likely entry rate. Instead he believes the euro has taken sterling's place as a target for buying and selling by international traders. The pound is seen as an 'intermediate' between the dollar and euro.

Lewis added that UK manufacturers are enthusiastic about the euro because it is falling.