The effective exchange rate measures the value of a currency against a basket of other currencies. This exchange rate index is usually trade-weighted to take into account the relative importance of other currencies. When looking at the effective Sterling exchange rate we compare the value of Sterling against our main trading partners – The Euro, …
The Eastern European Boom When Will Polish Economy Overtake UK and France?Watch this video on YouTube Whilst Western Europe struggles with low growth, Eastern Europe is booming. In the past two decades, Eastern Europe has quietly witnessed an economic transformation, with growth in living standards outperforming the West. Estonia, Poland and Romania have all seen …
In 2016, some argued the UK had the best of both worlds – membership of the EU, but opt outs from the Euro and Schengen Agreement, plus a generous rebate. However, since leaving the EU, the UK economy has experienced numerous problems, lower growth, lower investment and devaluation of the Pound, with some arguing GDP …
In September, the Pound plunged to its lowest level on record reaching a low of 1.03 during a day’s trading. The markets were spooked by the government’s unfunded tax cuts and likely £190 bn budget deficit. Investors viewed the Kwarteng/Truss budget as the shortest suicide note in history. Investors sold Sterling and UK bonds, creating …
Exchange rates are determined by factors, such as interest rates, confidence, the current account on balance of payments, economic growth and relative inflation rates. For example: If US business became relatively more competitive, there would be greater demand for American goods; this increase in demand for US goods would cause an appreciation (increase in value) …
A summary for understanding exchange rates. Factors that affect exchange rates and the impact of exchange rates on the economy. Terminology Depreciation/devaluation – fall in value of exchange rate – exchange rate becomes weaker (see also: definition of devaluation and depreciation) Appreciation – increase in the value of exchange rate – exchange rate becomes stronger. …
An overvalued exchange rate implies that a countries currency is too high for the state of the economy. An overvalued exchange rate means that the countries exports will be relatively expensive and imports cheaper. An overvalued exchange rate tends to depress domestic demand and encourage spending on imports. An overvalued exchange rate can also be …
A look at how interest rates and inflation affect the exchange rate – in short, higher interest rates tend to cause an appreciation in the exchange rate. Readers Question: In currency investing, would it be more profitable to invest in a country with high-interest rates and high inflation, or low to zero interest rates with …