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The new economics: currencies and inflation

Article Abstract:

Economists have changed their views on the impact of a rise in the value of pound sterling. Previously economists though that a strong pound would reduce the cost of imports allowing foreign companies to boost their stake in the British market. This has changed and European firms exporting to the UK are seen as less likely to cut prices in case UK firms follow, and a price war erupts. UK retailers and wholesalers may also price to market, and absorb more profits. Similarly, exporters are seen as less likely to reduce volumes than prices, in the new view, so their profit margins may be hit.

Foreign Trade Companies NEC, Other Miscellaneous Nondurable Goods Wholesalers, WHOLESALE TRADE--DURABLE GOODS, Trading companies

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The new problem with Britain's trade balance

Article Abstract:

The United Kingdom trade deficit dropped in May 1997 and shows little evidence of the impact of the high value of pound sterling. This could mean that the pound will continue to stay high, which will affect the profits of exporters. Some analysts foresee a delayed impact of the pound's high value. The strong US economy is boosting world trade which has helped UK exports and UK capacity usage is low. Both these factors help offset the impact of a strong pound. A fall in pound sterling may occur but is not inevitable.

Balance on Current Account, Balance of trade

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