Focus on Sterling

The hot topic of the moment continues to be sterling, and its woeful new position as doormat currency of the western world. Mervyn King seems to quite like the view from down here. There is a theory that he thinks it makes life easier for UK exporters. I don’t agree with that, and think instead he is happy just to make life more difficult for importers. Whichever it is, he’s not going to go out of his way to help talk up sterling in the foreseeable future.

So where does that leave you and me and our sterling nest-eggs back in the UK, or more likely in Jersey, Guernsey or the IOM? Actually, I’m going to withdraw smugly from this group, as I read my own forecasts and changed all my sterling for euros between 2004 and 2006 at an average of 1.4400 or thereabouts. I know those of you who didn’t don’t like to be reminded of the fact, but you were taking a big financial risk, and just now it doesn’t look too good.

For what it’s worth, my personal view is that sterling is undervalued, and it will recover. Not back to the dizzy heights of 1.5000 but possibly back to between 1.2500 and 1.3000, where I think we will eventually settle for entry into the euro in years to come. Now you all know that I think that anyone over here with any spare cash at all should be holding that cash in a tax efficient manner in France (no, I’m not going to say it). I just want to stress this week that sterling and tax efficient investing in France are not mutually exclusive. You can shelter your sterling from income tax and social charges; and you can retain the ability to choose when to convert to euros. In fact the case for doing this is so strong that I often wonder why I have to make it at all.