Born in around 775 AD when silver pennies (otherwise known as ‘sterlings’) were the dominant currency in Anglo-Saxon kingdoms, the Great British pound has been around for approximately 1200 years, making it the oldest currency still in circulation today. The official currency of the United Kingdom, the pound sterling – familiarly and affectionately referred to simply as the ‘pound’ or ‘quid’ – has survived a history of war, economic crises and a number of major revolutions, subsequently making it one of the most popular currencies in both the world and currency trading today.
Where it comes from
Despite its inherent Britishness, the pounds origins can be traced back to continental Europe, with its name having derived from the Latin word ‘libra pondro’, meaning ‘pound weight’. While its Latin counterpart has long since been discarded, its presence can still be felt in the £ symbol that it is otherwise referenced as today.
The Anglo-Saxon King, King Offa, is credited with first introducing the system of money into England, minting the earliest noted English silver pennies and embellishing them with his name. However, it was only in 1489 under Henry VII that the first pound coin appeared in circulation, referred to at that time as a sovereign.
It wasn’t until 1694, after England’s naval defeat by France in 1690 at the Battle of Beachy Head, that the first central bank in history – the Bank of England – was born, having exclusive control over this hand-written monetary value.
In 1717, for the first time, the UK began to define the pound sterling’s value in terms of gold, not silver. This idea was launched across the globe officially in the 1800s when Germany adopted the idea and, as a result, encouraged mass international trade for the first time in history.
The impact of politics on the pound
In 1914, to support war efforts, the United Kingdom borrowed large sums of money and suffered greatly from high inflation rates during World War I. As such, it temporarily suspended the gold standard and was forced to devalue the pound towards the end of the war, seeing the pound fall to the equivalent of 4.70 US dollars.
It was only in 1934, after the United States had devalued the dollar in 1933, that the pound rose to its highest ever value, with £1 being equivalent to $5.
Again, with the outbreak of World War II in 1940, the British government was forced to lower the value of the pound to the dollar – a trend that, from then on, continued due to a number of political turmoil inducing: high unemployment rates in 1976, international interventions in currency markets aimed at depreciating the dollar in 1985, the UK exiting the Exchange Rate Mechanism in 1992, the dot com bubble bursting in 2001 and, finally, the UK voting to leave the European Union in 2016, where the pound suffered one of its worst days ever and was equivalent to just $1.33.
The pound and currency trading
In fx currency trading, the pound is depicted as GBP and commonly falls fourth in line behind the euro, Japanese yen, and US dollar as one of the world’s most traded currencies. Given that the pound is also the third-most widely held reserve currency, some would argue that the pound holds a place of such high significance that it appears to outsize it’s economic use in the world. For example, it’s worth noting that the pound is one of the only currencies in the world that is worth more than the US dollar, whereby £1 has always bought more than $1.
As the oldest actively traded currency on the market and a currency featured in one of the top three major currency pairs in the world, the pound plays an integral part in the forex market. To find out more about the best currency pairs to trade when starting out on the market, read our blog post on this topic, here.
While Britain may be small in terms of its land mass compared to other nations, there’s no doubt that it remains a major driving force in the global economy due to its long history of economic leadership. It is for this reason that the pound is likely to remain a dominant global currency for many centuries to come.