The British pound sterling is the oldest currency in the world, which is about 1200 years old. Having originated in Anglo-Saxon times, the pound sterling underwent many changes before it turned into the currency that we know today.
The British pound sterling is both the oldest and one of the most traded currencies in the world. It currently ranks fourth in the foreign exchange market after the US dollar (USD), euro (EUR) and Japanese yen (JPY).
What Is the GBP?
GBP is an abbreviation of the British pound sterling, the official currency of the United Kingdom, the British Overseas Territories of South Georgia, the South Sandwich Islands and the British Antarctic Territory, as well as the crown dependencies of the United Kingdom – the Isle of Man and the Channel Islands.
Origin
Sterling silver pennies appeared as early as 775 AD, and the widespread distribution of these coins is considered to be the King of Mercia Offa. The first fully printed banknotes appeared in 1853. Before that, after its creation in 1694, the Bank of England issued only partially printed banknotes with the sign “£” and the first digit. The numbers were added manually, and each banknote had to be signed by one of the bank’s cashiers. Modern banknotes appeared on the basis of these original handwritten banknotes.
Appearance
Each banknote (£5, £10, £20, £50) has its own color and size – the larger the denomination, the larger the banknote. All coins (1 p, 2 p, 5 p, 10 p, 20 p, 50 p, 1 and 2 pounds sterling) depict the profile of Queen Elizabeth II, facing to the right. Traditionally, on pound coins, monarchs alternate depending on which way they are facing. The first banknote with a portrait of the Queen was a 1-pound note issued in 1960.
Thin metal threads were embedded in banknotes in 1940. This served as a protection against counterfeiting during the Second World War, when the British economy was under threat. The pound sterling is used not only in the UK; its varieties also go to the islands of Jersey, Guernsey, Maine, Gibraltar, the Falkland Islands, St. Helena, Ascension, Tristan da Cunha, South Georgia and the South Sandwich Islands.
Legislation and the British Pound
In a referendum in June 2016, British voters supported a proposal to leave the European Union, called Brexit.6 After the UK left the EU, the pound sterling fell significantly, and its value fluctuate depending on trade negotiations.
In September 2022, the pound sterling fell again after Prime Minister Liz Truss announced an economic policy aimed at reducing taxes. Although the Truss government sought to boost the productivity of the UK economy, investors and forex traders were concerned that tax cuts would lead to an increase in already high inflation and debt. On September 26, 2022, the GBP/USD exchange rate dropped to a historic low of 1.03.7.
How to trade on the world’s oldest currency
- Register with CMC Markets. After opening an account, you will get access to a demo account to first practice without risk on virtual funds, or you can immediately top up your account.
- Choose what you want to do: spread betting or CFD trading. Spread betting is not taxed in the UK* and does not entail any hidden fees.
- Select a tool. You can speculate on the price of the pound sterling using individual currency pairs, a short sterling contract or our CMC GBP Index. Read more information about each individual asset below.
- Follow the news of the Forex market. This market may be affected by interest rates, inflation and government decisions, which will have an impact on your open positions.
- With this in mind, add risk management measures. The use of stop-loss orders will help prevent losses as a result of volatile or unexpected price movements.
How can investors trade the pound sterling?
Individuals can trade the pound sterling and other foreign currencies through a foreign exchange broker (forex). Forex brokers specialize in trading currency products.
What is the difference between GBP and GBX?
GBP is the pound sterling, and GBX is an abbreviation of the penny sterling (plural: pence) – or 1/100 of the pound sterling. Since many stocks are traded in pence rather than pounds, exchanges may use GBX to indicate differences between pence and pounds.
Is the British pound considered a reserve currency?
The British pound sterling was the dominant currency and was considered the main reserve currency in which other countries kept excess cash. However, with the decline of the influence of the British Empire after the First and Second World Wars, the status of the reserve currency, which was previously occupied by the pound sterling, moved to the US dollar (USD). By the beginning of the XXI century, the dollar had become the world’s leading reserve currency, followed by the euro (EUR). According to the International Monetary Fund (IMF), the pound sterling took fourth place, giving way to the Japanese yen (JPY).
Changes in currency
The Bank of England put into circulation a new 12-sided 1-pound sterling coin on March 28, 2017, and the former 1-pound sterling coin lost its status as legal tender at midnight on October 15, 2017. Since then, the Bank has also replaced paper banknotes with plastic ones. In September 2016, a new polymer banknote with a face value of 5 pounds sterling was issued, and paper banknotes with a face value of 5 pounds sterling were withdrawn from circulation. In September 2017, plastic banknotes with a face value of 10 pounds sterling were also issued, and from February 2020 – 20 pounds sterling. Polymer banknotes are more durable, stay clean longer, and are more difficult to counterfeit, but they have also caused some controversy because they contain a product derived from animal fat.
Competition
For several years, the euro has been a serious threat to the pound sterling. Pressure was exerted from other EU countries and even within the UK, indicating the need for the UK to switch to the euro. Perhaps the pound sterling will outlive the euro, since there have been many political instabilities in Europe recently (for example, Brexit), which threaten to potentially break up the single currency of the Eurozone.
