Recently I noticed that the 1 USD was worth 0.8 GBP and now it’s worth 0.78 GBP. Not much deal to an average consumer. What does that mean for the economy for both countries and what does it tell about the relative strength of both currencies?
In: 28
This means that the pound became stronger. The reason is that there is a net import into the UK meaning that there are less people that wish to buy USD in order to pay for non-UK goods they wish to import into the UK them there are people that wish to buy GBP in order to pay for UK goods for export.
The result from an UK point of view is, that buying stuff priced in USD becomes more effordable as you need to exchange less GBP to obtain the same amount of USD. This means that imported goods will become more expensive. Same goes for going on a holiday in a USD country. In contrast, buying UK products as an outsider becomes more expensive.
This might result in an increase in UK imports and an decrease in exports resulting in a balance. If the UK production is however still more competitive despite this changes, the trend will continue, making life in the UK more effordable for its inhabitants and their savings more valuable on an international scale.
Minor fluctuation in the currency are quite frequent, but long term trends could indicate a general trade inbalance between different countries.
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