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There are two reasons, which have caused the pound to appreciate in value in 1997.
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Q (A) there are two reasons, which have caused the pound to appreciate in value in 1997. First, economic growth. Countries experiencing a positive economic growth cycles often find that their exchange rate is strengthening. Traders in the currency markets may take the fast growth to be a sign of general economic growth and "mark up" the value of the currency as a result. Also, economies with strong "export-led" growth may see their currency's rise in value. Japan is a good example of this in recent years. The Euro was weak during the first six months of its existence in part because the financial markets were worried about the slow growth of the European economy and the persistently high level of unemployment. Second, interest rates. Interest rates have a large effect in a world where financial capital can move freely between countries. When a country's interest rates are high relative to elsewhere this...
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