What does a weaker pound mean?
Weak pound – higher prices A depreciation effectively reduces the real purchasing power of consumers in the economy affected. This is because imports become more expensive – ranging from imported food and fuel to the value of the currency when consumers travel overseas.Click to see full answer. Also to know is, what happens when the…
Weak pound – higher prices A depreciation effectively reduces the real purchasing power of consumers in the economy affected. This is because imports become more expensive – ranging from imported food and fuel to the value of the currency when consumers travel overseas.Click to see full answer. Also to know is, what happens when the pound is strong?For example, when the pound is stronger, food and other items that come from overseas become cheaper. Businesses are also affected by the exchange rate. Many companies buy things from abroad (imports) that they then use to produce goods here. A stronger pound means that these imports are cheaper.Similarly, how does a weak pound affect exports? A weakened pound in the short term can help to balance out the UK’s account deficit, as it will both reduce the demand for imports to the UK, and improve the amount of exports. Thereof, who benefits from a weak pound? Firms selling goods abroad. Foreign buyers need less currency to buy the same quantity of UK goods. Therefore a weak pound means UK exporters can sell their goods cheaper and/or increase their profit margins.What would happen if the pound collapse?The devaluation of the pound would add to the mess. Imports would become more expensive, causing prices to rise. Wraith said that if pound-dollar parity happens, inflation would probably double, reaching between 4% and 5%. Some experts argue that a weaker pound would help the economy get back on track.
