With exams and revision currently occupying students across the country, I am sure that many of us are dreaming of going abroad to relax. Currently the British Pound is strong when compared to the Euro. This has its advantages and disadvantages. So what should you do when this occurs?
The positives of the strong pound basically mean that the same number of British pounds can buy more Euros than they could previously, which has the short term effect of us, to put it colloquially ‘being richer’ than Europe until the balance shifts again. It should be pointed out that we are not necessarily richer overall, it is just that our currency has more value than it did in the past so where last year we would have to buy the cheaper brand of beer, now we can upgrade.
Also, there are benefits in that imports are cheaper. Thus, if you want to import some goods, then now is a good time to do it, as the prices will be relatively cheaper.
On the other hand, our exports are more expensive – making them less competitive. This means that there will be more demand for the European cheaper goods and so sales of European goods will rise at the cost of UK goods. The government wants to boost the economy by increasing our exports leading to an addition to aggregate demand but this is more difficult with a strong pound as our exports are less favourable
Also if our prices are rising, it could lead to inflation and higher taxes in the future. These higher taxes will look to decrease aggregate demand until we are back at the start, with a weak pound (and the problems and benefits will be reversed). So there is basic economics, I would therefore highly recommend a holiday abroad!!