Forex Trading

What is the British Pound Sterling? What influences the British Pound?

Find out more about the British Pound and what influences the Pound

British Pound coin

The British Pound Sterling, commonly known as the POUND is the official currency of the United Kingdom and the Crown Dependencies. When the Euro Zone countries introduced Euro as a single currency, the Pound Sterling became the oldest currency of the world being used. At the moment, it holds the world’s third largest share of global currency reserves after US Dollar and Euro.

On the list of world's most-traded currencies, British Pound Sterling holds the fourth place. The Pound is openly traded in the foreign exchange markets all over the world. Its value fluctuates in relation to the other currencies. It can be said that the value of Pound rises when the traders buy pounds and it falls when the traders sell pounds.

Despite of the fact that Pound Sterling is not fixed to Euro for trading, mostly they move in sync with each other. When the inflation increases and the government decide to increase the interest rate, the value of Pound also boosts against Euro and other currencies. Following the repeated increase in the interest rates in 2006 and 2007, the Pound hit a high against US Dollar for a long time in April 2007.

The pound is largely influenced by the oil production. The oil production by the Britain in North Sea greatly affects the British economy which in turn affects the pound. This clearly indicates that Britain has energy reserves and whenever the oil prices hike, the British pound also amplifies. The Bank of England may need to keep a check on inflation, if the oil prices rise. This will also affect the consumer spending badly.

The British Pound is also largely influenced by the European currency, Euro. If Euro strengthens, the Pound is likely to become weak. Thus, trading Euro with Pound can turn out to be quite a liquid trading relationship.

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