Have any Americans been to the UK recently and felt absolutely robbed by the exchange rate??

Question

What is the deal with out exchange rates??

I remember 10 years ago, the exchange rate from the dollar to the pound was around $1.40 for one pound.

Now , I just checked and it is over $2.00 now to buy one pound.

To buy a one pound American Express Travel Cheque , costs $2.22 !!!

Do these exchange rates level out when you compare them to the actual prices over there or not??

I am feeling like a third world person almost traveling to a first world country!!

How expensive is it now??!!!

Answer 1

You are steaming under an illusion that exchange rates have something to do with price levels. They don't. What you are alluding to is called "the law of one price". As early as in 1977, an economist named Peter Isard have concluded that the law of one price is "flagrantly and systematically violated". Instead, the exchange rates pay way more attention to interest rates, especially real interest rates. British interest rates have been consistently above those in the U.S. for a while, so a lot of money flowed into the British money market, bidding up the pound in the process of doing so...

Answer 2

The prices do not fully level out. It can be much more expensive but that depends on what you buy. Sodas, for example are much more expensive, same with CD's. You can get decent deals on food if you go to a grocery or buy the full lunch instead of picking and choosing.

It also depends on where you are - London is much more expensive than other areas. As you pointed out though, the pound has consistently been worth more than the dollar. As a traveler, it always hurt a bit, now it just hurts a bit more :\

Answer 3

The fact is that the dollar is weak internationally - not just against the £ - in terms of what you can buy. Its even weaker against the euro for example. When I go anywhere in Europe it feels expensive. But the US - or Asian countries pegged to the dollar - feels cheap.

This is partly because the US is importing far more from abroad than it is exporting. That is offset by US income from its overseas investments. But the extent of those differences is far, far higher than one would normally expect. The problems is that the dollar could go a whole lot weaker unless the fundamental imbalances in exports and imports change.

Answer 4

now you know how we felt when we only got 1-40 dollars to the pound..Ican assure you the prices dont level out as it is bloody expensive to live here in England..You may be aware that all our prices carry a 17.5 tax on them so how much value do you get for your dollar ..Also we are paying 2 dollars a litre for petrol and extortionate prices for houses to live in yet everybody wants to live here .....why

Answer 5

Really, we British feel like Uncle Sam has lots of bargains for us. $2 for £1 sounds pretty fantastic for us on this side of the pond.

At least it does for tourists. I'm not so sure businesses like it.