GBP (British pound sterling)

Key points

• GBP is the ISO code for the British pound sterling, the United Kingdom’s official currency, symbolized by £ and commonly called “sterling” or the informal “quid.”
• The pound is the world’s oldest currency still in use as legal tender.
• Major trading pairs: EUR/GBP and GBP/USD (the latter nicknamed “cable”).
• One pound = 100 pence (often abbreviated p; stocks and markets sometimes use GBX to indicate pence).

Overview

The British pound sterling is the United Kingdom’s currency and is also used, or pegged to, currencies in several British Overseas Territories and crown dependencies (examples include the Falkland Islands pound, Gibraltar pound, and Manx pound). It has high global trading volume and plays a major role in foreign exchange markets alongside the U.S. dollar, euro, and Japanese yen.

Trading and market notes

• Common pairs: EUR/GBP and GBP/USD. GBP/USD is commonly called “cable.”
• In accounting and forex contexts, “sterling” or the abbreviation STG may be used.
• Several smaller territories peg their currencies to the pound.
• The pound’s exchange rate is sensitive to U.K. fiscal policy, political events, and monetary policy from the Bank of England.

Brief history

• Origins: Currency forms related to the pound date back to around the 8th century; the pound became the official currency of Great Britain after the 1707 union of England and Scotland.
• Banknotes were handwritten until the mid-19th century.
• Gold standard: The pound was tied to gold before World War I, abandoned at war outbreak, briefly reinstated in the 1920s, then abandoned during the Great Depression.
• Floating currency: The U.K. moved to a floating exchange rate system in 1971.
• European integration: The U.K. opted not to join the euro in 1999–2002 and retained the pound.
• Recent shocks: Political events such as the 2016 Brexit referendum and policy announcements (e.g., the 2022 fiscal measures that led to sharp market moves) have produced significant volatility in GBP exchange rates.

Legislation and fiscal policy effects

Major political and fiscal decisions influence sterling’s value. Examples:
* Brexit (2016) triggered notable depreciation and heightened volatility during negotiations.
* Fiscal announcements and budget measures can move markets quickly; changes to tax regimes, residency rules, or bond issuance affect investor expectations and currency demand.

Role of the Bank of England

The Bank of England (BoE) is the central authority for monetary policy and financial stability in the U.K. Its main tools and channels that affect GBP:
* Base interest rate: Changes influence borrowing costs, spending, inflation expectations, and capital flows. Higher rates tend to support the currency; lower rates can weaken it.
* Quantitative easing (QE): Bond purchases add liquidity to the economy and can reduce the currency’s value if supply rises relative to demand.
* Forward guidance and other interventions also shape market expectations and exchange-rate behavior.

FAQs

Q: Are “pound” and “sterling” the same?
A: Yes. The official name is “pound sterling,” often shortened to “pound” or “sterling.”

Q: Why is it called “sterling”?
A: The term is thought to come from sterling silver pennies used in medieval England.

Q: Why do people call it a “quid”?
A: The origin of “quid” is unclear; it’s longstanding slang similar to how “buck” refers to the U.S. dollar.

Conclusion

The GBP (British pound sterling) is a historically significant and actively traded currency. Its value reflects a mix of domestic monetary policy, fiscal decisions, political events, and global market forces. Traders and observers watch Bank of England policy, U.K. budgets, and major political developments for signals about sterling’s direction.