The British public’s response to the fall in the dollar has been gleeful. Thousands will descend on New York’s Fifth Avenue this Christmas, armed with sterling credit cards and an appetite for cheap luxury goods. Yet given strong similarities between the US and UK economies, their window of opportunity before the pound follows the dollar down may prove to be brief.

The dollar’s real exchange rate has fallen more than 9 per cent in the last 12 months on a measure produced by the Bank of England. The pound has fallen a little, but not nearly as far. Yet while the UK’s current account deficit – 3.7 per cent of gross domestic product in 2006 – is some way behind the corresponding US deficit of 6.2 per cent, it is still substantial. Both economies have enjoyed consumer spending booms; both have seen large rises in household debt.