If the European Central Bank cuts interest rates and the Bank of England does not, it is likely that the value of the £ will ___and the UK trade deficit will ___.

Question

If the European Central Bank cuts interest rates and the Bank of England does not, it is likely that the value of the £ will  ___and the UK trade deficit will ___.

Quizplus · Accepted Answer

When the European Central Bank cuts interest rates, it typically makes the euro less attractive to investors compared to currencies with relatively higher interest rates, such as the pound in this scenario. As a result, the value of the pound (£) is likely to rise. A stronger pound makes imports cheaper and exports more expensive, potentially leading to an increase in the UK's trade deficit as the country buys more from abroad and sells less.

If the European Central Bank Cuts Interest Rates and the Bank