Currency Exchange: Forward Discount/Premium

Suppose that the spot exchange rate between USD and GBP is USD/GBP 1.5814; i.e., USD 1.5814 = GBP 1.0.  If the 1-year forward exchange rate is USD/GBP 1.5660 (so USD 1.5660 = GBP 1.0), then we say that the GBP is trading at a (one-year) forward discount (versus the USD): the forward price for GBP […]