Broad Oak: your emotional support animal

Wednesday, July 16, 2008

Will the UK/US trade balance influence the dollar value of sterling?

Here's some trade stats for UK/USA. Last year, we imported $6.6 billion more from the US than we exported to them. Last night, the exchange rate for the pound rose above US$2.00. For some time, we seem to have been shadowing the dollar, but do we have an incentive to allow the dollar to fall further against the pound?

Or will we be more influenced by the desire not to devalue the amount we have loaned to the US via Treasury bonds? And then there is the possible extra unemployment that could result from UK goods becoming more expensive in dollar terms.

Any forex experts care to give a view?

UPDATE: Here's the answer, it seems:

Weak jobs data knocks pound vs dollar and euro (Reuters)

UPUPDATE: ...And here's a different answer:

Sterling up versus dollar, banks support (Reuters)

Wouldn't roulette be more honest, somehow? "Manque! Pair! Impair! Passe! Noir! Rouge! Numero 17!"

2 comments:

Andrew Allison said...

I am not an economist, but I would imagine that the weaker the dollar is against sterling, the greater the US imports into the UK. I wouldn't like to be a UK company that relies on American sales. Extra unemployment? I would think so.

SACKERSON said...

It seem logical to me that there's an incentive for a weak pound, to help our trade with US/EU - if it's weak for long enough to let our manufacturers respond - yet at the same time it boosts the cost of imports, including raw materials and energy. Cleft stick?