The UK might be a small landmass, but it’s the world’s sixth-largest economy, and spectators have watched the British Pound with interest for a while now. From the country’s adamant refusal to join the Euro Zone to the stark drop in value following Brexit, there’s certainly plenty to discuss here!
I have experience trading not just forex but also stocks and options as futures and cryptocurrencies. For a period I day traded futures, and among my long-term investments, I have a portfolio of residential rental properties. I hope you find this and the blog post its based on, useful.
The British Pound is the world’s oldest currency that’s still in use. It’s also one of the strongest currencies, ranking above both the Euro and the US Dollar. Anyone who’s visited the country on vacation will confirm that the exchange rate can be hard-hitting (unless they happen to come from Kuwait, Jordan, Bahrain, or Oman).
Unsurprisingly, this makes it a popular currency among traders — it’s the fourth most traded currency in the world, making up around 6.4% of trades in total. If you’ve kept up with the news over the last few years, you’ll also know that it’s extremely volatile.
The past six years have seen the Brexit referendum result, two national elections, and now the COVID-19 market crash — the future of the country is increasingly uncertain, with the outcome of Brexit and the post-pandemic future still in the balance. All these factors affect the pound’s value relative to other currencies.
Just as endless uncertainty about where we’re allowed to go and what we’re allowed to do has become the new normal for most of the world, the new normal for the GBP/USD exchange rate has been endless volatility. At least, that’s been the state of affairs for the last few years.
To begin with, Brexit was a big topic. After the public voted to leave the EU, the value of GBP with respect to EUR plummeted. It hasn’t recovered since — GBP/EUR was about 1.4 in late 2015, but the two currencies are now close to parity.