A strong pound is associated with which of the following?

• A. A strong pound is associated with low demand for the currency and weak exports.
• B. A strong pound leads to higher import costs.
• C. A strong pound reduces domestic inflation.
• D. A strong pound is associated with high demand for the currency and exports performing well.

Answer: (D)

When the pound is strong, it has appreciated because there is high demand for the currency in the foreign‑exchange market. That demand usually signals confidence in the UK economy or higher returns from holding pounds. A strong currency can go hand in hand with export performance if overall global demand for UK goods is solid or if exporters manage to win contracts despite the currency’s strength, so you see exports performing well in that context. The other statements don’t fit this pattern: a stronger pound means imports are cheaper, not more expensive; a weak currency would be associated with low demand for the currency and weaker exports; and while a stronger currency can dampen domestic inflation by lowering import prices, inflation effects are slower and less direct than the clear link to demand for the currency and to export performance.