It was over 25 years ago that £1 was worth more than $2 on the foreign exchange markets, but that important psychological barrier was broken again this month as the value of sterling crept above $2 on foreign exchange markets. The continuing weakness of the dollar is making life difficult for UK exporters and also for firms in the Eurozone as the weakness in the dollar also affects the Euro and other major currencies.
Pound reaches 26-year dollar high BBC News Online (18/4/07)
UK pound goes through $2 barrier BBC News Online (17/4/07)
Yen hits record low against euro BBC News Online (16/4/07)
Pound hits 25-year dollar high Guardian (18/4/07)
British pound breaks through $2 International Herald Tribune (17/4/07)
Questions
| 1. | Explain the impact of the weak value of the dollar on international markets on the price of UK imports and exports. |
| 2. | Assess the likely impact of the high value of sterling on the major UK economic targets. |
| 3. | Assess policies that the government could use to try to reduce the value of sterling against the dollar if they chose to. |