Is there something special about the British pound?
A lot, really.
The pound sterling, commonly known as the British pound, holds one of the most significant and prestigious assets that a currency can have. One of the feats under its belt is being the 4th most traded currency in terms of turnover and the 3rd most widely held reserves in the world. Take note that these feats are not just on a national level, but on a global scale.
It’s not only today that the British pound possesses a global significance that is envied by many other countries. Once upon a time, it was the world’s most dominant currency before the US dollar took over. But even then, the British pound has never really left the global scene and still plays a significant role in the global financial market.
The Might of the United Kingdom
The country behind the sterling pound also holds significant assets that make it an important player on the global economy. When we look at the nominal GDP, the United Kingdom, as of 2019, holds the 6th spot as the largest economy in the world.
Also, it is known for its economic resiliency as it thrived even during the global credit crisis and recession in 2008.
On top of that, the UK’s capital, London, is considered as the 2nd most important financial centre in the world. This status makes Britain a worthy alternative to the costly U.S securities regulations when raising capital. Moreover, by looking at its long history of significance on the global stage, Britain really knows its way to make its economy strong and resilient.
How exactly?
Generally, the UK always initiates pro-business policies and is a significant player in advanced industries such as aerospace and pharmaceuticals. It’s also a substantial contributor to big sectors such as finance, banking, accounting, and advertising. Aside from these, one of the most notable things about Britain is its globally competitive workforce despite its ageing population.
The United States remains Britain’s most significant trading partner. But Europe is also a substantial source of the country’s import and export demands. Although relying on Europe as its primary source of economic strength has notable disadvantages. When Europe experiences economic instability, it will undoubtedly affect Britain.
What Drives the British Pound?
One way of looking how the pound trades is through Britain’s policy of maintaining its inflation rate at 2%. Also, the Bank of England’s interest rate announcements and commentaries affect the pound’s trading movements. Traders and other market players also watch the state of the country’s major commodities such as grain, natural gas, and oil. These commodities must be taken into consideration because of the inflationary pressure it can cause.
Britain being a significant destination for global investment and a favoured destination for raising capital also drive the British pound into further significance. The British pound is also one of the few currencies that is worth more than the U.S. dollar.
Aside from taking the pro-business route, Britain has a ‘management style’ of being prudent and conservative to strengthen its economy. This is to ensure that its growth continues no matter what economic weather the world may present.
Also read: Currency Devaluation Is Not the Solution for Country Economy
