Profit margins to take a pounding

Article Abstract:

Pound sterling has increased in value by nearly 10% after a drop in 1996 but the UK current account deficit is forecast to fall in 1996. The pound is seen as undervalued and still competitive despite its rise in relation to the German mark. Many UK companies do not have enough strength to affect the price they sell at in overseas markets. A rise in the value of the pound thus leads to a drop in they prices they sell at measured in pounds. Costs are increasing which means that some exporters will see a drop in their profits.

Balance of Payments, Exports, Balance of trade

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Sterling labours under an illusion

Article Abstract:

The UK Labor party has been associated with devaluation but there is little evidence to support such a view. The pound sterling is likely to be strong whichever party wins an election, partly since it is undervalued and the UK economy should benefit from factors like low inflation and a decrease in the budget deficit. The Labor party could strengthen the pound by seeking to join European monetary union, but may not be able to deliver such a pledge and this could cause problems for the pound.

Economic policy, Labour Party (United Kingdom)

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Sterling: a pounding

Article Abstract:

Pound sterling could drop further although it may be undervalued in relation to the German mark, according to Kleinwort Benson. Purchasing power parity suggest an undervalued pound, but this relates to long-term movements, and short term factors such as political risk and an increase in the UK money supply may have a short-term effect of depressing the value of the pound. The UK current account deficit may also worsen in 1997, which would depress the pound.

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