Since 1 January, sterling has traded in the 68p-70p to the euro range, when it needs to be closer to 73p-74p for the comfort of British industry. Moreover, this much-needed depreciation needs to happen early if the pound is to enjoy a couple of years of stability ahead of Britain joining the euro.
Given the fact that UK interest rates have fallen much faster than anybody thought likely six months ago, reflecting the slowdown in the economy, the pound-euro exchange rate might have been expected to weaken. True, euroland interest rates have fallen more than expected too, but its economy will probably still outpace the UK this year.
This puzzle has to be seen in the context of the bigger question about euro-dollar-yen exchange rates. The dollar has stayed surprisingly weak against the yen when the US economy is pounding away. While the trade gap might point to an eventual and possibly dramatic decline in the dollar- yen rate, short-term considerations all seem to point the other way. With Japan still deep in recession, its currency surely must decline before it climbs.
At the same time, the dollar has fared better against the euro than seemed likely ahead of the launch of the new currency, when it was thought there would be a general switching out of dollars as the euro establishes rival reserve currency status. This switching effect has obviously been postponed.
What does this mean for the pound, bobbing around in the wake of these big moves? There are two possible arguments for expecting or hoping sterling will weaken. It could fall against the euro for fundamental reasons - slower UK growth and lower interest rates - or, because of the traditional sterling-dollar link, it might weaken against the euro if the dollar does.
Alternatively, sterling might turn out to have cast off from the US currency just a bit too early. With its line now attached to the euro instead, it would in these circumstances appreciate further, forcing the Government to negotiate entry into the single currency at a rate that is much too uncomfortable for UK industry. The historical precedent is not encouraging, so fingers crossed for a weaker pound.