Sterling's Sudden Slide

Exporters are cheering, but does higher inflation loom?

For months, the pound's strength has been a hot political issue in Britain. BMW Group blamed its decision to close British auto maker Rover Group on the high pound. U.S. auto giant Ford Motors Corp. gave it as the reason for shutting down its assembly plant in Dagenham and axing 9,000 British jobs. Other beleaguered manufacturers in Britain's Northeast claim the currency is eroding British competitiveness and threatening 187,000 more jobs. "The strong pound has become a political hot potato that's driving policy," said Goldman, Sachs & Co. chief currency economist Jim O'Neill in London.

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