“Global standard” gauge of currency misalignment has GBP 22% undervalued against the USD

Here’s a bit of (useful) fun, The Economist’s “Big Mac index” to gauge whether currencies are at their “correct” level against the US dollar.

Its based on the currency valuation model of purchasing-power parity (PPP), i.e. that “in the long run exchange rates should move towards the rate that would equalise the prices of an identical basket of goods and services (in this case, a burger) in any two countries”.Says the magazine (link here, may be gated(

  • Burgernomics was never intended as a precise gauge of currency misalignment, merely a tool to make exchange-rate theory more digestible. Yet the Big Mac index has become a global standard, included in several economic textbooks and the subject of dozens of academic studies. 

Some of the results (more at that link)

The Economist's "Big Mac index" currencies US dollar