GBP - British Pound

The pound (symbol: ?; ISO code: GBP), divided into 100 pence, is the official currency of the United Kingdom and the Crown Dependencies. The slang term "quid" is very common in the UK.

The official full name pound sterling (plural: pounds sterling) is used mainly in formal contexts and also when it is necessary to distinguish the currency used within the United Kingdom from others that have the same name. The currency name — but not the names of its units — is sometimes abbreviated to just "sterling", particularly in the wholesale financial markets; so "payment accepted in sterling", but never "that costs five sterling". The abbreviations "ster." or "stg." are sometimes used. The term British pound, used particularly by the U.S. media, is not an official name of the currency.

The pound was originally the value of one pound Tower weight of sterling silver (hence "pound sterling"). The currency sign is the pound sign, originally ? with two cross-bars, then later more commonly ? with a single cross-bar. The pound sign derives from the black-letter "L", from the abbreviation LSD – librae, solidi, denarii – used for the pounds, shillings and pence of the original duodecimal currency system. Libra was the basic Roman unit of weight, which in turn derived from the Latin word for scales or balance. The ISO 4217 currency code is GBP (Great Britain pound). Occasionally the abbreviation UKP is seen, but this is incorrect. The Crown Dependencies use their own (non-ISO) codes when they wish to reflect their distinctiveness. Stocks are often traded in pence, so traders may refer to Pence sterling, GBX (sometimes GBp), when listing stock prices.

Following the adoption of the euro by several countries, sterling became the world's oldest currency still in use, and is currently holds the third biggest portion of global currency reserves after the US dollar and the euro.

Following the U.S. dollar

Since leaving gold, there have been several attempts to peg the value of the pound to other currencies, initially the U.S. dollar.

Under continuing economic pressure, and despite months of denials that it would do so, on 19 September 1949, the government devalued the pound by 30%, from US$4.03 to US$2.80. The move prompted several other governments to devalue against the dollar too, including Australia, Denmark, Ireland, Egypt, India, Israel, New Zealand, Norway and South Africa.

In the mid-1960s the pound came under renewed pressure since the exchange rate against the dollar was considered too high. In the summer of 1966, with the value of the pound falling in the currency markets, exchange controls were tightened by the Wilson government. Among the measures, tourists were banned from taking more than ?50 out of the country, until the restriction was lifted in 1970. The pound was eventually devalued by 14.3% to US$2.41 on 18 November 1967. With the break down of the Bretton Woods system — not least because mainly British currency dealers had created a substantial Eurodollar market which made the U.S. dollar's gold standard harder for its government to maintain — the pound was floated in the early 1970s and so subject to a market appreciation. The Sterling Area effectively ended at this time when the majority of its members also chose to float freely against the pound and the dollar.

A further crisis followed in 1976, when it was apparently leaked that the International Monetary Fund (IMF) thought that the pound should be set at US$1.50, and as a result the pound fell to $1.57, and the government decided it had to borrow ?2.3 billion from the IMF. In the early 1980s the pound moved above the $2 level as interest rates rose in response to the monetarist policy of targeting money supply and a high exchange rate was widely blamed for the deep recession of 1981. At its lowest, the pound stood at just US$1.05 in February 1985, before returning to US$1.77 during the 1990s. There are often long periods where the pound and the euro move in sync, although since the middle of 2006 this correlation has weakened. Inflation concerns in the U.K. led the Bank of England (BoE) to hike interest rates twice unexpectedly in late 2006 and early 2007, causing sterling to rise to its highest rate against the euro since January 2003. This had a knock on effect versus other major currencies, and the pound hit a 15 year high against the US dollar on January 23, 2007, peaking at US$1.9916 per pound.

The euro

As a member of the European Union, the United Kingdom has the option of adopting the euro as its currency. However, the subject remains politically controversial, not least since the United Kingdom was forced to withdraw from its precursor, the European Exchange Rate Mechanism (see above). The pound did not join the Second European Exchange Rate Mechanism (ERM II) after the euro was created.

Denmark and the UK have a unique opt-out from entry to the euro. Technically, every other EU nation must eventually sign up; however, this can be delayed indefinitely (as in the case of Sweden) by refusing to join ERM II.

The idea of replacing the pound with the euro has been controversial with some sectors of the British public because of its identity as a symbol of British nationalism.

In Scotland there is additional concern that the adoption of the euro would mean the end of regionally distinctive banknotes, as the European Central Bank do not permit national or sub-national designs of the banknotes.