ALEX BRUMMER: Mixed blessing for sterling
There was a pleasant surprise this week when I transferred funds to my son living in Austin, Texas.
After years of under-performance, the exchange rate was $1.37 to the pound. This is far short of the $2 seen in 2007 but we should be thankful for small mercies.
Possibly when Rachel Reeves and the Government have recovered from a fiscal battering over welfare, she will argue that sterling's strength reflects on her stewardship as Chancellor. During Liz Truss's brief tenure as Prime Minister, the pound plunged close to dollar-parity trading at a low point of $1.03 on September 26, 2022.
It is worth reflecting on why sterling is recovering before hanging out the bunting.
The recovery has less to do with UK fiscal discipline and prospects for output and much to do with Donald Trump. The President's attacks on the independence of the Federal Reserve are the main cause.
Trump has revived his unrelenting attack on chairman Jay Powell, describing him as 'terrible'. There is speculation that the White House will soon unveil Powell's successor even though his term is not up until May 2026. It is not unusual for central bank appointments to be telegraphed early, but above ten months is ridiculous.
Anything which undermines confidence in the world's most important central bank must be taken seriously. None of the favoured candidates to replace Powell are on the wild side. They include former Fed governor Kevin Warsh; a Fed governor, Christopher Waller; as well as Treasury Secretary Scott Bessent and White House adviser Kevin Hassett.
Sterling's rise is useful for British visitors to the US this summer but is not a cause for unmitigated celebration.
The 8.7 per cent jump in value this year will make exporting to America, the UK's largest single overseas market, harder. This at a time when the motor industry has only just emerged from the tariff shock which decimated production.
Staley stain
There is no point in rerunning the details of Jes Staley's close relationship with sex offender Jeffrey Epstein. The former Barclays boss was badly advised when he took the matter to the financial regulator's Upper Tribunal. Successive Barclays chairmen were wrong-footed by Staley, who bolstered the bank's investment banking franchise. My understanding is that previous chairman John McFarlane was so pleased to capture the former JP Morgan stalwart that when he sought a phone reference from fellow chairman Jamie Dimon, the call ended before a warning about the Epstein connection could be made.
Chairman Nigel Higgins plainly did not scrutinise Staley's record closely enough before the bank told the Financial Conduct Authority that Staley and Epstein did not have a close relationship. Higgins' days at the helm could be numbered.
Gas man
Gordon Brown did a good job when he encouraged then-Centrica chairman Sir Roger Carr to take a minority stake in British Energy, operator of Britain's nuclear power industry, when it was sold to France's EDF for £12.5billion in 2008.
Some 17 years on, another Labour government has approved a new super-nuclear reactor at Sizewell C in Suffolk. Centrica, in keeping with the past, reportedly will be a 15 per cent shareholder. A British commercial presence should help to keep the project on track.
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