GBP stands for the British Pound Sterling, the official currency of the United Kingdom, some British Overseas Territories, and several UK crown dependencies including the Isle of Man and the Channel Islands.
Symbolized by the (£) sign, the pound is often colloquially referred to as “sterling” or “quid.” As a prominent global currency, it plays a vital role in international trade and finance.
Key Insights
- GBP is the standard abbreviation for the British Pound Sterling.
- Typically denoted by the £ sign, the currency is often referred to as “sterling” or “quid.”
- Popular trading pairs involving GBP are the Euro (EUR/GBP) and the US Dollar (GBP/USD).
Master the Art of Trading GBP
The British pound is traded extensively against other major currencies like the US Dollar (USD), Euro (EUR), and Japanese Yen (JPY). Notably, prominent forex pairs include EUR/GBP and GBP/USD, with GBP/USD colloquially known as “cable” among forex traders.
In GBP’s trading world, the penny sterling or pence is a subdivision where one penny equals 1/100th of a pound. Stock exchanges often list prices in pence and use the abbreviation GBX to indicate this. In more formal settings, you may encounter species abbreviations like STG (sterling) or technical mentions in forex markets.
Currencies pegged to the GBP include the Falkland Islands Pound, Gibraltar Pound, Saint Helena Pound, Jersey Pound (JEP), Guernsey Pound (GGP), Manx Pound, Scotland notes, and Northern Ireland notes. Remarkably, the British pound takes pride of place as the oldest active legal tender still in use globally.
The Rich History Behind GBP
GBP was adopted as the United Kingdom’s official currency when England and Scotland unified in 1707. Nevertheless, its legacy dates back to 760, making it one of the oldest continuous currencies. Before commencing printed banknotes in 1855, all Bank of England notes were meticulously handwritten.
Under Colonial rule, GBP dominated in parts of Australia, New Zealand, and Canada. The Gold Standard dominated international finance in the late 19th and early 20th centuries, with GBP pegged to gold’s value before World War I prompted its abandonment. Reinstated in 1925, it was eventually discarded following the Great Depression.
1961 marked GBP’s journey into floating freely, unpegged from gold or other reserves to freely fight market forces. Contrary to the European Union, which adopted the euro in 2002, the UK remains committed to the GBP, retaining it as its national currency.
Legislative Impact and GBP’s Performance
The 2016 Brexit referendum substantially influenced GBP’s value, which dipped and fluctuated significantly as Britain moved away from the EU, further affected by complex trade negotiations. Additionally, in 2022 during Prime Minister Liz Truss’s announcement of tax cuts, the GBP/USD pair dropped significantly, reaching an all-time low of 1.03 on September 26, 2022.
How to Trade GBP Effectively
Individuals interested in trading GBP and other currencies often do so through a specialized foreign exchange (forex) broker. These professionals focus explicitly on various forex products.
Understanding GBP vs. GBX
GBP designates the pound sterling, whereas GBX refers to the penny sterling or pence (plural). Since many stocks trade in pence, the use of GBX on stock exchanges is quite common.
GBP’s Position as a Reserve Currency
Historically significant, GBP once wielded primary status as a global reserve currency during the height of the British Empire. However, its dominance declined after successive world wars. Nowadays, the US Dollar (USD) and euro (EUR) have usurped GBP’s position. According to the International Monetary Fund (IMF), GBP currently trails behind the Japanese yen (JPY) in modern reserve standings.
Conclusion
The British Pound Sterling (GBP) maintains its enduring presence as the oldest active legal tender globally. Despite fluctuations and market challenges, it continues to command a significant role in foreign exchange markets, emblematic as (£).
Related Terms: foreign exchange, euro, US dollar, gold standard, Brexit.
References
- IG. “Top 10 Most Traded Currency Pairs”.
- CMC Markets. “What Is the World’s Oldest Currency?”
- U.K. Parliament. “Act of Union 1707”.
- European Commission. “20 Years of the Euro in Your Pocket”.
- U.K. Parliament. “The ERM and the Single Currency”.
- European Union Law. “Brexit: EU-UK Relationship”.
- The Guardian. “Why Is Sterling Falling and What Does It Mean for the Rest of the World?”
- International Monetary Fund Data. “Currency Composition of Official Foreign Exchange Reserves”.
