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Currency issues could affect the global economic recovery

The International Monetary Fund (IMF) has today confirmed that the current exchange rates around the world may well impact upon the short to medium term recovery of the global economy. Indeed, the IMF believes that current exchange rates are not favourable for a balanced global recovery and we will see Asian currencies maintain their strength against Western currencies for the foreseeable future. So what does this mean for the UK?

It is no secret that the UK currency has been under severe pressure over the last few weeks, due to the fact that the Bank of England appears unable or unwilling to support the currency at current levels. However, while a lower UK currency exchange rate will encourage overseas investment it will also feed the fire of inflation and potentially increase the cost of living in the UK. So in effect this is something of a double-edged sword in that increased overseas investment will help the UK economy get back on track but more expensive imports will not help control the cost of living in the UK and the underlying rate of inflation.

The UK government certainly has a very difficult balancing act to address in the short to medium term.

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