The Effects Of Exchange Rates In The USA And UK

If the interest’s rates in the United States increase more than in the UK means the economy in the US is very strong, even that is more expensive to borrow money. If the Pound reduces the value vs the American Dollar can benefit from the changes most the exporters of British products. The mathematics is simple: For Americans buyers, where the market is handled in dollars, need less money to acquire the same amount of product, which makes them more competitive. On the positive side, this scenario is important for exporters, who see a boost in their products that become much cheaper in America Market.

On the negative side, American exports to the United States would be more expensive and would be less attractive in inventing. Indirectly, the bonanza of the exporters would benefit British manufacturing, which gains momentum due to the growing demand from abroad. Although, of course, the equation is not always that simple. In the past, there were periods of a weak pound that did not serve much to the British industry because productivity levels were low, with no room to seize the opportunity and grow. Also, if the United States economy goes into recession, low prices may not be enough incentive to generate an interest in British products. And the type of product on offer, of course, will not benefit all exporters equally.

The cars are the biggest export good in terms of value will be among those who take part in the crisis. With a cheap pound, the Jaguars and the Land Rovers will have a chance to progress against BMW or Lexus, for example. The same with goods that are the quintessence of British production. Scotch whiskey will now be much cheaper than brandy or bourbon. One of the immediate effects of the fall of the pound has been to discourage British travel to Europe, where in question it would be more expensive for the British and cheaper for the Americans.

The balance, in search of balance

The loss of value of the pound should also improve the health of the British trade balance since exports become more attractive than imports. A weak pound will help reduce the deficit by making exports competitive and cutting demand for goods from abroad. The shares of British companies, quoted in pounds, can become cheaper in the USA market. The stronger the dollar, then, the greater the profits. As a result, while the pound touches the floor. A weak pound makes the UK attractive as a destination to invest.