- guardian.co.uk, Wednesday March 15 2000 16.39 GMT
The textbook method of correcting such an imbalance would be to tighten fiscal policy, either through reduced public spending or higher taxes.
In theory, a significant fiscal tightening aimed directly at the consumer would ease upward pressure on interest rates and the pound and help to narrow the gap between the domestic economy and the internationally exposed sectors.
It would also help bring UK interest rates more into line with those in Europe, smoothing Britain's entry to the single currency.
However, the relationship between fiscal policy and the exchange is not always as mechanistic as the textbooks suggest. In the past four years, the chancellor has tightened fiscal policy by 5% of gross domestic product, 1.2% more than that seen in Euroland. Yet sterling has appreciated substantially over this period.
The unpredictable behaviour of sterling - and the proximity of the next election - suggests that Mr Brown is unlikely to try to tighten fiscal policy much further on March 21. Indeed, he may even loosen it slightly.
With Labour anxious to shore up its core support, however, any tax cuts are likely to be modest, leaving as much scope as possible to increase public spending when the new three-year programme is unveiled in the summer.
