It is usually called the pound, but some people still call it Sterling. But no matter how it can be called, the British pound remains one of the strongest currencies in the world. This comes as a surprise to some — especially those outside the UK, and those who don’t travel quite often — but it really makes a lot of sense for the pound to be so expensive.
Why is the British pound so expensive
This is great for anyone coming from the UK to travel to other countries; but for some of us trying to spend our hard-earned money in the UK, we lack luck. These are just a few reasons that explain why the pound is so expensive, and, of course, there are other factors affecting the exchange rate.
The factors listed here are definitely may affect changes, but at the same time, decisions of financial institutions such as the Bank of England, the European Central Bank and the US Federal Reserve also have a significant impact on foreign exchange. At the moment, it is enough to say that the influence is distributed evenly between these factors. Here are a few reasons: why the British pound is so expensive these days.
Many people throw the word “inflation” around, not really understanding what it means. But inflation is one of the best explanations for why the pound is only about 1.2 US dollars. According to this article, inflation can be defined as the rate of increase in commodity prices and “a decrease in the purchasing power of cash.”
”To fully understand this, we would have to look at UK export goods. Some of Britain’s main export products include various equipment, automobiles, precious metals and minerals, pharmaceuticals, and more. Demand for these products is constantly high, and therefore the pound is always on the rise. Since inflation in the UK is lower than in many other countries, its purchasing power is therefore higher.
Why is the British pound so expensive
Investors have great control over what is happening with the world currency exchange. When we start talking about speculation and how much this affects the pound, it is sometimes hard to believe. Speculation simply refers to the conclusions made by experts in the financial industry regarding the value of a particular currency.
For example, if economists speculate that the value of the pound will increase (or is already in a growing state), investors are more likely to demand and invest in this particular currency. When investors invest large sums of money to invest in currencies in order to make more profit, exchange rate volatility greatly affects profitability. The British pound has been a strong currency for some time, and investors still believe that it is worth investing in this currency.
Balance of payments
#Why is the British pound so expensive. This is probably one of the most important factors in the characterization of the current currency pound sterling. Simply put, a balance of payments (or PB) is a country’s record of a deal with the rest of the world. The PB shows the movement of funds to and from the country in terms of their export and import behavior.
Most countries have a deficit in their account, but this simply means that the value of imported goods is higher than the value of exported goods. The UK currently has the narrowest deficit since 2012 at around £ -30.1 million. For comparison, America’s current deficit is approximately $ -130.4 billion. A deficit and surplus cannot determine the value of the currency, but they certainly are considered huge factors.
#Why is the British pound so expensive. The amount of government debt can have a huge impact on the value of the currency. For example, if foreign investors believe that this or that country cannot pay its debt, then the only logical step is to get rid of holdings in this country. UK public debt has actually just exceeded £ 1 trillion, and this is certainly not good news for anyone. To put this in perspective, America’s national debt has recently been estimated at approximately $ 22.78 trillion.
While the UK is a few light-years behind America in debt, it is important to know that debt is not really the key to currency value. It is a belief that the country in question is capable of paying off this debt. Britain has always had strong ideas of public debt, but the British system really needs a major overhaul. Whether this will happen soon enough does not really matter. The important thing is that foreign investors trust the value of the pound, and therefore its value actually increases.
Here’s another reason the British pound is such an expensive currency: sentiment. Sentimentality is associated with speculation, but this time it is only about the average citizen or team. We no longer talk about what economists say or what experts think. When you talk about feelings, you are simply guided by the opinion of an individual or group.
You can say that one of the reasons the British pound is so highly valued is because people think it is of high value. It just so happened that this is the opinion of the majority. If this opinion begins to decline, it is likely that the value of the pound may also go down. Observation of the mood of the nation in relation to its currency will show how valuable this currency is. #Why is the British pound so expensive