Pound Sterling - GBP

Considered as one of the oldest currency in circulation (it would have been created at the XXIth century), the Pound Sterling (GPB – “Great Britain Pound”) is the currency unit of the United Kingdom of Great Britain and Northern Ireland, so as the Channel Islands and certain overseas Britain territories’ one.

As an historical idiosyncrasy, the United Kingdom was the last worldwide great economy to adopt the decimal system (only in 1971, 1 Pound was equivalent in the previous system to 20 shillings and not to 100 pence like it is since then). From the 2.80 Dollars of 1949 (in the frame of the Bretton Woods Agreements of 1944) to the 2.40 Dollars of 1967, the Pound sterling depreciated even more sharply against Dollar, after the abandonment of the fixed exchange rates from 1973, to reach 1.60 Dollar in 1976, and even 1.05 Dollar in 1985.

The Bank of England has never been in favor of an intervention on the foreign exchange market (Forex); in fact, the Bank of England has always promoted maintaining a low inflation in the United Kingdom as a guideline of its monetary policy.

The recent history of the Pound sterling rate fluctuations (4th more negotiated currency on the Forex) has been influenced by a high key interest rate policy run by the Bank of England in 2006 and 2007, the Pound apprised at the hand of the other great currencies: the Dollar (1 GPB = 2 USD on April, 18th 2007) and the Yen.

Then the financial and banking crisis made the Pound sterling sharply depreciate, since this one lost more than a quarter of its value against the Dollar and the Euro, so the parity was nearly 1 GBP = 1 Euro by the end of 2008, an argument in favor of the integration of the United Kingdom in the Euro area, but the British public opinion was not favorable to it.

Since then, the Pound sterling apprised again of about 7% (between January and April 2009) against Euro.

At the structural level, we can see that the Pound sterling tends to apprise when the energy price increases, as the United Kingdom is the most important energy producer (it represents 10% of its GDP) and the price rise implies more purchases of Pound Sterling for the energy importing country.