The current strengths and weaknesses of sterling - Essay Example

The latter part of the essay deals with some measures that the bank of England could adopt so as to be able to resolve the particular problem that the United Kingdom is facing due to its weak currency. The value of the currency is important for any country because it determines, as Vlaar (2007) states, the position of the country in the world market. The exchange rate (the ratio between the local and foreign currencies) takes into account the present value of the currency of a particular country and ascertains the differences with respect to other currencies.

This comparison is necessary because this way the effect of the exchange rates on the import and the export growth can be studied. Exchange rates are a critical determinant of the success of countries in terms of economic development. The impacts of the exchange rate on the Gross Domestic Products (GDP) are far reaching and so it is pertinent to study the values of currencies with respect to other currencies. In this paper, I would focus on the current value of sterling, the currency of the United Kingdom, and compare it to the values of the other major currencies thereby determining its strengths and weaknesses.

For the purpose of research I have analyzed a few literature reviews. From the study of the value of sterling in the past two to three years one fact that is quite evident is that the value of sterling has been falling continuously. Although there have been minor deviances from the overall downward trend, for instance the value of the pound sterling rose by one penny against the Euro in February 2009, the value of pound has fallen by 16% with respect to the American Dollar and by 21% with respect to the Euro since early 2008, as Hyde (2010) states.

There was a point in September 2009 according to Steiner et al. (2009) when the value of the sterling was even less than 1 €. The rate at which the sterling was exchanged to the Euro was just 0.99. The falling