British pounds - Effects in the Economy

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At the outset, it is important to understand that all currencies across different countries are effected mostly by the same economic factors. To be specific, primarily following five factors effects the currencies are:
i)     Monetary policy
ii)    Price inflation
iii)   Confidence/Sentiment
iv)   GDP - Economic Growth
v)    Balance of Payments

Pound sterling is one of the most popular currencies in the Foreign Exchange market. It is the considered to be the oldest actively traded currency, Its origin is traced to specie based Sterling which was in the form of a silver coin in 775 AD. At present, this is one among the six strong currencies as compared to Dollar. The other five currencies are- Euros, Bahrain Dinar, Kuwaiti Dinar, Latvian Lats and the Omani Rials.

The use of Sterling for trade within Britain continued till 1694 when Bank of England was formed. The Bank assumed the duties of printing paper bank notes representing various denominations of Sterling and Pounds. These bank notes serve as basis of modern form of bank notes. During World War I and II, the fallout and the global depression caused stagnation of growth in Britain and the subsequent devaluations. It marked end of traditional Gold standard, Though Sir Winston Churchill attempted to restore the re-institution of Gold but it ended in 1931. The start and end of Bretton Woods agreement among Allied nations lost its validity in 1971 when USA scrapped the system of linking Dollar with Gold which was originally agreed upon.

At present, the pound rates are now fluctuating due to the reasons mentioned above.But long term ramifications of U.K.leaving European Union on its Forex rates are largly unknown.             

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