Jim Logan, the owner of an American based small business, Sports Exports, Inc., specializes in exporting footballs to Great Britain. In return, he receives payments in British pounds every month which need to be converted into dollars. He has noticed that the exchange rate between the dollar and the pound at the time of exchange every month is significantly affecting his profits. Since he is a small business owner and not a foreign currency expert, he has hired your consulting firm to advise him with respect to the following matters below

Mr. Logan expects that British inflation will rise substantially in the future. In previous years when the British inflation was high, the pound depreciated. The prevailing British interest rate is slightly higher than the prevailing U.S. interest rate. The pound has risen slightly over each of the last several months. Mr. Logan wants you to forecast the value of the pound for each of the next 20 months. You explain to him that this will result in an additional fee, but that your firm will explain how the extra service would work.

1. Explain how you can use technical forecasting to forecast the future value of the pound. Based on the information provided, do you think that a technical forecast will predict future appreciation or depreciation in the pound?

2. Explain how you can use fundamental forecasting to forecast the future value of the pound. Based on the information provided, do you think that a technical forecast will predict future appreciation or depreciation in the pound?

3. Explain how you can use market-based forecasting to forecast the future value of the pound. Based on the information provided, do you think that a technical forecast will predict future appreciation or depreciation in the pound?

4. Does it appear that all of the forecasting techniques will lead to the same forecast of the pounds future value? Which technique would you prefer to use in this situation?