The reason lies in the explanations for the pound's rise. Sterling has been driven partly by the divergence between the strong British and weak European economies, just as the dollar has been driven up by the strength of the US economy. Not only are interest rates higher in Britain than elsewhere in Europe for cyclical reasons, they are also likely to remain higher as long as the UK remains outside EMU. So relative yields favour sterling, and will do for some time.
On top of that, there is a safe haven effect. The euro is an unknown quantity, investors are unsure how tough the European Central Bank will be, and there might yet be some market turbulence affecting the EMU currencies.
Add to that the froth that financial markets always lavish on a one-way bet, and there is no earthly reason for traders to do anything other than bid the pound higher. A change in market sentiment is some months away, and will probably need a trigger like decisive signs of strong growth in Germany, or the start of a downturn in the US economy.
Can the MPC alter this by leaving or even cutting interest rates? Almost certainly not, as the market judgement concerns the underlying state of the economy rather than the Bank's reaction. Unchanged or lower rates would still leave yields in the UK at a very attractive level, and could backfire if the markets decided it would give a new spurt to the economy's pace of growth.
Could Mr Brown have made things better with a tougher Budget? Probably not. Not only has his fiscal policy been pretty tough anyway, it is too blunt an instrument for fine-tuning the economy. Higher taxes on consumers announced in March would hammer spending too late to make any difference, never mind breaking the Government's political pledges.
The Government has also ruled out, for the time being, the one step that would make a big difference to sterling, namely joining the single currency at an early date. This would have been the best way to remove exporters' sterling headaches, and to do it permanently.
There are some tactical steps left that might help a bit. The Bank of England could announce next week that interest rates are on hold for the foreseeable future, as it did in August - as long as the members of the MPC have reached this conclusion. The Government could decide to intervene in the foreign currency markets, sending a signal about its views on the exchange rate by selling sterling. This might have a symbolic effect that would remove some of the speculative froth.
But the inescapable conclusion is that the economy is where it is and isn't going to get anywhere else very quickly. The time for somebody to do something was before the election, when Kenneth Clarke should have raised interest rates to cool growth to a sustainable pace. Mr Brown and the MPC should ignore the chorus of complaint and keep their eyes fixed on the right policies for the economy next year and every year beyond.Reuse content