GBP/USD Futures & CFD
Pound Sterling is the official currency of United Kingdom, divided decimally into 100 pence. It is the world’s oldest currency that is still in use today. According to Encyclopedia Britannica, the term is derived from the fact that, about 775 silver coins known as “sterling’s” were issued in the Saxon kingdoms; 240 of them being minted from a pound of silver, the weight of which was equal to the later troy pound. Hence, large payments came to be reckoned in “pounds of sterling’s,” a phrase later shortened to “pounds sterling.” Market participants nicknamed the cross rate of pound against the USD dollar as “the Cable” based on the fact that the rate was originally transmitted via a transatlantic cable used to synchronize the London and New York exchange markets.
The pound sterling is the third largest reserve currency and fourth most traded currency after USD, EUR and JPY. The Bank of England established GBP as a paper money in 1694; afterwards, the currency was pegged to the gold standard in 1816. It moved away from the gold standard in 1931 due to the Great Depression. Under the Bretton Woods system in 1940, the currency was pegged to the US$ at £1 = $4.03 till the end of World War II. In 1971, the currency was floated. During the early eighties, the pound moved above the level of $2 level, mainly due to a rise in interest rate. At its lowest, the pound stood at US$ 1.05 in February 1985 and by the nineties it has pared back to US$1.66. In late 2004, the pound was worth US$1.94, but has fallen to mid $1.70s as of July 2005 and today, one pound sterling is worth 1.94 US dollars.
In the Forex market, the GBP/USD pair accounts for about 8.8% of the total volume of transactions. The British Pound has so far gained momentum in 2013. The new Bank of England Governor, Mark Carney, who took the helm in July 2013, said that he sees no need for additional bond buying by the central bank given brightening UK economic fundamentals. The UK economy grew at an annualized rate of 2.9% in the second quarter of 2013, a pace matched only by Germany among Britain's economic peers. Under Mr. Carney, , the central bank has sought to underpin recovery with a pledge not to consider raising its benchmark interest rate from a record low of 0.5% until unemployment in the UK drops to 7%, a threshold officials believe could take until 2016 to cross.