The British Pound (GBP USD) stands as one of the world’s oldest and most influential currencies. The impact of the British pound on the world economy is significant, due to the fact that the UK is one of the leaders in international trade, and its currency is known for stability and reliability.
In addition, many countries use the British pound as a reserve currency, contributing to its stability. The British pound constitutes approximately 8% of the total world foreign exchange reserves. Nevertheless, the primary global reserve currency remains the US dollar, holding a substantial share of 58%.
Since the British pound and the US dollar are the two most popular and widespread currencies globally, their exchange rate is of great interest to investors, traders, and economists.
Since the early 2000s, the GBP USD pair has exhibited notable volatility. In general, its exchange rate dynamics can be summarized through several key phases:
- From 2002 to 2008, the British pound gained strength against the dollar, reaching a maximum value of 2.07960.
- In 2009, a sharp decline ensued due to the global financial crisis, causing the British Pound to fall to the level of 1.43149 by the end of the year.
- After 2010, the British pound embarked on a gradual recovery, but by 2016, it rolled back to 1.22422, largely influenced by Brexit and weak UK economic indicators.
- Starting in 2017, the British pound stabilized and began a gradual ascent, ultimately reaching 1.42053 by mid-2021. After falling to 1.11556 due to traders’ fears about the new UK government’s economic plans creating tension in the financial sector, the price reversed course, and right now, we can observe an upward trend with periodic corrections.
As with all currencies, the exchange rate of the British Pound against the US dollar is subject to substantial fluctuations, caused by multiple factors. For long-term investment and trading in GBP USD currency pair, it is essential to consider the dynamics of economic indicators, political events, and other elements that can affect the exchange rate.
GDP, inflation data, unemployment, and other macroeconomic indicators affect currency supply and demand in the global market, thereby affecting exchange rates. And also, speculative sentiments come into play since the foreign exchange market consistently features speculators using diverse strategies to profit from currency fluctuations, potentially influencing exchange rate dynamics through large currency purchases or sales.
Judging by the current levels, the price may test 1.20000 soon if the bulls fail to return above 1.24000. It is more advantageous for the bears to fend off 1.24000 and to break through 1.20000 quickly, preventing the bulls from responding effectively.
