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.

The US Dollar is the most common currency that is commonly quoted in trade across the globe. It is one of the most popular currencies in the world. However, there are several other currencies that are actually not affected by the US Dollar movements in the forex market. These currencies may not be as popular as the US Dollar; nevertheless, they hold their own importance and are backed by several factors in their own countries that make them hold their ground strongly, in case of Dollar fluctuations.

The Euro:

European Union decided to have its own currency in 1999 and introduced it in the forms of coins and notes by the year 2002. Since then, the Euro has been one of the strongest contenders against the US Dollar. The EU consists of Austria, Belgium, Greece, Germany, France, Ireland, Italy, Luxembourg, the Netherlands, Portugal, and Spain. Socialist countries, which are also the largest countries of EU, hold the reigns of government budget deficits. The ECB or the European Central Bank is the lead bank that decides the monetary policies and aims to keep a check on inflation rather than keeping a check on economic contraction. The ECB has kept steady interest rates in past when there had been an economic slow down. Thus interest rates or adjustments in Euro exchange rates are less frequent.

The Japanese Yen:

Japan is a net importer of goods. However, the US and Europe are its major customer for its machinery and other production. Japan especially needs crude oil to keep its economic machinery running like clockwork. Bank of Japan faced one of the major deflationary crises in 1990s when it was compelled to switch to zero interest policy. At this time, Yen experienced the carry trade – when an entity buys a currency at zero interest rate and parks it in another account with high interest rates. In 1990s, the US treasury bonds and German bunds witnessed many such transactions. This means that the Japanese Yen shall always trade lower against the Euro and US Dollar which gives Yen/Euro trade as a viable pair. The only contention offered to this trade is the Chinese Yuan. China is one of the biggest competitors of Japan. Since china also artificially floats its currency, it may weaken the Yen’s value eventually.

The British Pound:

Britain has oil production in North Sea which can influence its economy. This means that Britain has energy reserves and thus, whenever the oil prices have gone high in past, so has the British pound. However, Britain has been experiencing a net increase in its demand for natural gas which has made it as a net importer of natural gas. This means that if there are any outrageous price spikes in the commodity, it would lead Britain to economic exposure. If oil prices start to head north rapidly, Bank of England may need to keep inflation in check and consumer spending may be severely affected. The British pound is also susceptible to strengthening of European currency. Thus, trading Euro with Pound can be quite a liquid trading relationship.

The Canadian Dollar

It is also referred to as "the Loonie" as it has the bird, huard, on its coin. Loony is the French for huard. Bank of Canada is country’s central bank that dictated the monetary policies for the nation. It holds eight meetings in a year to decide upon the interest rates policy. Canada is also world’s second largest reserve for crude oil with more than 175 billion barrels of reserves. The US is its main customer and if there is an increase in the oil prices, they would further strengthen the Canadian Dollar.

The Swiss Franc

It is commonly known as the "the Swissy". It is one currency that is capable of outperforming the Euro if there is dissention between the EU members. It is backed by gold thus is considered one of the safest currencies. Inflation, economic contraction, political stability and excessive economic growth are some of the factors that affect performance of the Swissy.

British Pound posted its biggest weekly decline in forex trading against the Euro since 2005 as speculation increases on a slowing economic expansion. Speculation has also increased that the Bank of England (BoE) will reduce its interest rates as early as December. The British Pound has fallen against 14 of the 16 most traded currencies in forex trading this week. ''Sterling is likely to remain under pressure against the euro this year,'' said Martin McMahon, a currency strategist at Credit Suisse Group in Zurich. ''The inflation report was on the dovish side, retail sales weren't great, so it's understandable we see markets pricing in rate cuts, even before Christmas.'' The latest industry/government reports showed evidence that the housing-market boom has fizzled and consumers are reducing spending as interest rates at a six-year high curb demand.

In forex trading against the Euro, the Britihs Pound fell to 71.52 pence by late yesterday in London, from 70.22 roughly a week ago. It declined to 71.67 yesterday, the weakest level since June 2003. The weekly decline of 1.9 percent was its biggest fall since July, 2005.

The British Pound gained against the U.S. Dollar for its fifth consecutive week on speculation that the Bank of England (BoE) will continue to raise its interest rates while the U.S. Federal Reserve remains on hold. ``The pound's been moving higher against the dollar as concerns rise about the state of the U.S. economy, and on the outlook for BOE interest rates,'' said Ian Gunner, head of foreign-exchange research at Mellon Bank NA in London. ``At the moment all the traffic has been one way, and there's no reason why sterling shouldn't go higher.'' The Bank of England (BoE) raised its rates for a fifth time in a year last week to help slow inflation, which has been riding above 2 percent. Futures traders have speculated a quarter percent increase to 6.25 percent by the end of this year.

In the foreign exchange against the U.S. Dollar, the Pound Sterling traded at $2.0367, which is its highest level since June 1981 before softening to $2.0357. The British Pound traded at $2.0108 over a week ago. Against the Euro, the British Pound was at 67.77 pence per Euro, from 67.92 June 12.

The British Pound dropped against the U.S. Dollar after the Bank of England fulfilled expectations by increasing interest rates by a quarter of a percentage point. ''The market will be reluctant to draw too much from the statement and the hike, both of which were in line with expectations,'' said Daragh Maher, a currency strategist at Calyon in London.

Despite falling, the British Pounds decline is still limited after a report from the National Institute for Economic and Social Research revealed that the U.K economy had managed to expand by 0.7 percent.

In the foreign exchange against the U.S. Dollar, the British Pound was worth $1.9839 compared to $1.9922 earlier in the week.

The British Pound dropped to its lowest level against the Euro in almost a year on expectations that the European Central Bank (ECB) will increase its interest rates above the Bank of England's current borrowing rate, effectively making the Pound less attractive.''We've seen an unwinding of some of the expectations for higher rates,'' said Ian Gunner, head of foreign exchange research at Mellon Financial Corp. in London. ''CPI softened off, wages haven't risen as fast as forecast and we expect euro- sterling to go higher further out as ECB rate increases will be more durable.''

In the foreign exchange against the Euro, the British pound was worth 67.45 pence in comparison to a previous trade of 67.49 pence. It also traded at 1.9614 U.S. Dollars in comparison to a February 27 trade of 1.9622 U.S. cents.

The British pound rose after the Bank of England made an unexpected rise in interest rates by a quarter of a percent. Thr British pound then rose to its to its highest level since June 2005 after the Central bank lifted its interest rates to 5.25 percent. Investors are betting a second interest rate rise after today, as inflation in house prices has rose quicker ever since the rate increase last November. ''It took the markets by surprise,'' Marios Maratheftis, a currency strategist at Standard Chartered Plc, said in London. ''People will start to consider the possibility of more interest rate hikes. It's a significant positive for sterling.''

In forex-trading, against the Euro, the British pound was worth 66.38 pence compared to 66.92 yesterday. Against the US. Dollar, it was at 1.9448 US. cents from 1.9221 US. cents. The U.K interest rates currently are the same as the US. Federal Reserve's.

The first week of May may probably present a lethargic market with Japan and China going on holiday mode to the week they call "Golden Week". Golden week is a holiday in both Japan and China - Japanese financial markets are closed for trade from May 3 to May 5. While in May day (aka Labor day) (1st of May) is celebrated by the USA and UK and other countries.