The nominal exchange rate is the price of one currency expressed in terms of another currency. This is the exchange rate quoted on foreign exchange markets, e.g. £1 = US$1.30, or £1 = €1.20. The former means that £1 can buy US$1.30, or that US$1.30 is needed to buy £1. This is also referred to as a bilateral, i.e. two-sided, exchange rate. Nominal exchange rates are not adjusted for changes in the prices of goods and services over time or between countries.
Figure 1 shows the nominal US$/£ exchange rate over the approximate 10-year period from the start of 2016 to July 2025. Although there are fluctuations over the period, it shows an overall fall in the strength of the pound against the dollar from around £1 = US$1.57 at the start of 2016 to around £1 = US$1.35 in July 2025. Ceteris paribus, this implies that UK goods and services became more competitive in comparison with US ones.
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