Looking at the last item:
Canada has current account surplus, and UK has a deficit.
I marked -1.0% for UK as a strenthening of its currency because only when currency is of high, import>export, resulting in a deficit.
I wanna know where I am wrong. thanks
Exports > Import = Capital account surplus…
Bills in exporters currency so will see increase in demand hence strenghtening
These two statements contradict each other (by my understanding):
Canadian Exports > Imports
UK has a current account deficit (I assume because of Imports > Exports)
Based on the material BOTH currencies should appreciate. Is this correct?
I can only assume these appreciations are to the detriment of some other 3rd currency (probably the USD).
I agree with FinNija,
-1% is not a big deficit, and the country needs to keep its currency strong enough to attract foreign capital. This is what Schweser says.
Current account = changes in net foreign assets
If Import is more - country’s consumption is not getting fulfilled domestically - they will ask for more produce from overseas & if there currency is strong relative to excess producers of such good they import more…Eventually strong currency will widen current account deficit & later comes a point when your import bills rises too much (obligation is in the exporter currency) your currency starts depreciating.