CURRENCY WATCH by James Trescothick GBP
Is the world’s oldest currency showing its age or is there life in the old pound yet?
COMMODITIES
FX
Te Great British Pound also known as the sterling has the deserved title of being the world’s oldest currency which is still in use with its origins dating back to the reign of King Offa of Mercia in 760 AD. Te Sterling is also in the unique position of being the world’s third biggest reserve currency and the fourth most traded currency with 12.8% daily share in 2016 according to the Bank of International Settlements.
And let’s face it, in 2016 it really was the Kim Kardashian of the currency world as it was constantly in the media following the shock Brexit referendum
result in June. Te dramatic fall for the sterling against the USD to levels not seen since 1985 had many market commentator speculating that parity was only sessions away. Tinking back, it was only a couple of years ago when there was market chatter about which central bank, the FED or the BOE, would raise interest rates first.
But
aſter the drama of 23rd June we have seen BOE reduce interest rates and the US raise interest rates twice; what a difference a vote makes. Parity of course has not happened and though the sterling is still trading lower against both the greenback and the EURO since the
vote, it has recovered slightly.
Now as we wait for the official divorce proceedings to start between the UK and the EU there is much speculation on what the future holds for the GBP. But before we get into that, I thought we would have a quick look at the recent lows and highs of this famous currency.
Lows - February 1985
Let’s start with looking back at what happened in 1985 and why the pound was trading as low as $1.05 against the USD. Now at the time, it wasn’t a case
FX TRADER MAGAZINE April - June 2017 11
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