Present Condition Of The British Pound

The current global status of the British pound is favorable and has enjoyed an increase in popularity during recent years. It is used as a global reserve currency and is currently third in amount against reserve currencies. The pound sterling’s percentage of total global reserves has recently increased over the past few years due to the stability of the economy and government in the United Kingdom. It can also contribute this increase to the high interest rates it yields in comparison to the other major currencies like the US dollar, the euro, and yen.

When the United Kingdom refused to join the European Union (EU), they passed up the opportunity to use the euro as their currency, but so far, this decision has been a good one. While the British pound and the euro are not fixed to each other, there are oftentimes significant periods where they do correlate. However, since mid 2006, the correlation between the two currencies began to weaken. Inflation concerns during late 2006 and all of 2007 caused the Bank of England to increase their interest rates, which in turn caused the pound to rise against the euro to its highest rate since early 2003. In late 2007, the pound began to weaken once again and fell below €1.25 in April 2008, the first time ever that to fall that low.

Against the US dollar, the British pound has always enjoyed a superior stance in regards to foreign currencies. The dramatic climb of the pound compared to the euro in 2006 allowed the pound to enjoy a secondary effect against the other major world currencies. During this time, around April 2007, the pound rose to a fifteen year high against the US dollar. It rose above the $2 mark; the first time since 1992. From that point on, until the beginning of 2008, the British pound continued to strengthen against the USD. However, the pound does not enjoy singular success here as the US dollar began to plummet in 2007 and many other world currencies strengthened against it. During November of 2007, the pound reached a high of 26 years at $2.11610, but since early 2008, the pound has been on a downwards trend, but has managed to express itself less dramatically against the USD than the euro or yen.

The present condition of the British pound is favorable, but all world currencies are suffering during this economic climate. Currently the 1 GBP will buy you $1.64 USD, €1.09, and $1.81 AUD. Still, the pound has always enjoyed superior status in regards to foreign currencies.