Strong Pound - Winners and Losers

The Strong Pound – Winners and Losers <?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" /> The dollar’s depreciation is gathering momentum and the pound is now worth considerably more than $2 to the £1 at the time of writing. Perhaps £1=$2.10 is the next realistic benchmark in the days and weeks ahead. The CBI released data this week hinting that the strong pound is now starting to hit export competitiveness and orders for manufacturers.

This BBC article provides a good overview of the winners and losers from a <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />UK perspective of the appreciation of sterling against the dollar.

BBC: http://news.bbc.co.uk/1/hi/business/6567821.stm

Lawrence Summers, writing in the Financial Times is good reading for A2 economists who want to understand deeper inter-relationships between economies and regions in the global system:

“The falling dollar generates anxiety almost everywhere. Americans and those dependent on American growth worry about the proverbial “hard landing” as inflation and interest rates rise with a weakening dollar, causing asset prices and output to fall. Europeans and others with currencies that float freely against the dollar worry that their currencies will bear a disproportionate share of the dollar’s decline and appreciate too far, leading to competitiveness problems. The falling dollar risks rising inflation, asset bubbles and the loss of macroeconomic control in countries that have tied their currencies to the dollar’s sagging mast.”

More here: http://www.ft.com/cms/s/0/19910d64-858f-11dc-8170-0000779fd2ac.html

Download a presentation here:

Exchange_Rates.pdf