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Is sterling really overvalued?

When comparing sterling’s real effective exchange rate to its ten-year average,the currency appears to be around 12% overvalued – which is the largest degreeof misalignment among the developed market currencies that we track. What’s more, in its latest Article IV assessment of the UK economy,the IMF estimated that sterling was between 5% and 10% overvalued last year,largely due to the UK’s big current account deficit.

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