Trading the British Pound
The British Pound or GBP, also widely known as Sterling, is the fourth most traded currency in FX markets, after the Big Three (the US dollar, the euro, and the Japanese yen). The pound is also favoured by central banks, which frequently keep a substantial allocation of sterling on their books.
Ever since the euro was introduced, UK governments have continued to be vexed with arguments over whether the country should join the euro bloc, but so far Britain has resisted.
More recently, however, the Bank has embarked on a process of ‘quantitative easing’ designed to help stimulate the UK economy by printing money to buy up debt. This has led to higher interest rates, but with UK base rates so low already, it had few other options.
The pound is regarded as a relatively responsibly-managed currency at the moment, and FX investors have a high degree of confidence in the track record of the Bank of England in managing the currency since 1997. The Bank has been tasked with keeping UK inflation rates below 2% and the governor of the Bank of England must write an open letter to the Chancellor of the Exchequer (the UK finance minister) every month it fails to do so.