The pound was created in 1489 and is classified as one of the world’s oldest currencies. It is said to be descended from the Anglo-Saxon period. The pound sterling is an important part of the world’s micro-economic and macro-economic market and so is the exchange rates. The exchange rate of pound and its demand and supply is significant to investors who are involved in international trade and it also determines the flow of Balance Of Payments, parity and spot rates. It has one of the highest trading volumes in the world and accounts for 13% (approximately) of the trading volume in the foreign exchange markets. Following are the characteristics of GBP from the given GBP/EUR currency pair: To begin with, the silver coin was introduced as a penny in 760 and the currency was finally settled by paper notes in 1694 after changing plenty of forms including handwritten notes. The reason behind increasing value of the currency was that the notes were published for the value of gold instead of the original silver coins used at that time. The UK used the gold standard to peg the value of British Pound; however, it was abandoned at the outbreak of World War I. The GBP was dominant and stable in the economy for a very long period until the appearance of US dollar that changed the situation drastically. The circulation of British notes in the market was started in 1694 and the currency was regulated by The Bank of England. The British Pound was used as a major currency known as the
To understand the reason, and perhaps necessity, for the conception of the Currency act of 1764, one must have a grasp of the economic situation in the American colonies prior to 1764. The currency used in the American colonies has always revolved around, specie or the two types of paper currency, legislatively issued legal tender or land bank notes (Finkelstein 39). Foreign specie was far more common than British specie, due to an export prohibition of British specie and an unfavorable balance of trade between the American colonies and Britain that drained whatever British specie
To properly understand the insignia on the physical coin, it is first important to understand the historical background. From the arrival of the Germanic peoples collectively known as the Anglo Saxons to the invasion of William of Normandy, the political system in Great Britain was primarily divided into seven different Kingdoms called the Heptarchy(“hept” meaning seven and “archy” meaning rule)2. These Kingdoms were Wessex, East Anglia, Northumbria, Sussex, Mercia, Kent, and Essex. The Mercian border fluctuated over time, but it was generally in power over the modern day midland region
The exchange rate is the price of one currency in terms of another. A fall in the value of the pound is known as a depreciation and affects both the level of aggregate demand and the costs of production for firms in the UK economy. //One way in which a fall in the exchange rate can be beneficial for the UK economy is that it “should
Even before the creation of the Federal Reserve, banks were used by the public just as we use them today. Deposits were made into savings accounts. Loans were taken out to mortgage a home or finance a new business. Banknotes were issued and spent when the public borrowed from the banks. Borrowers spent these banknotes just as paper money is spent today. These bank notes were valued as money since they were backed by the promise that they would be exchanged on demand for either gold or silver.
Another problem plaguing the economy of Britain was that the Americans continued to issue a large amount of paper bills. The British felt the effective way to halt the issuing of the bills was to put in place a Currency Act. They saw the paper money as "greatly depreciating
One needs to have a base level understanding of what defines an exchange rate. According to Investopedia, a foreign exchange rate is “The price of one country's currency expressed in another country's currency. In other words, the rate at which one currency can be exchanged for another.”(Investopedia, 2012) The process by which foreign exchange rates are determined is really not any different than any other
Despite the inflation of New England paper money, it was successful in stimulating the New England economy. Likewise, Pennsylvania utilized the Pennsylvania pound to fend off a depression in the 1720s, but unlike New England, their bills stayed stable throughout their circulation until the Revolutionary War. To understand why these paper currencies were so successful, it is
It was one of the earliest monetary policies to institute the circulation of paper money on a national level. Customers would deposit their gold coins for storage into a bank for a small fee. In return, they received bank receipts, which were then used as paper money in place of valuable elements like gold. The idea of using bank notes as paper money quickly gained popularity because they were, of course, much easier and more convenient to transport and exchange than heavy gold coins.
Ever since the Bretton Woods agreement in 1944, the U.S dollar became the world’s currency. Bretton Woods agreement was basically an agreement on which every country currency would be back up by the dollar, due to the fact that after WWII United States was the only one with the biggest gold reserve in the world. Although it was proposed as a good idea it had its flaws for one even though it help the U.S and other countries there was simply not enough gold to continue backing up the dollar value. Which lead to President Richard Nixon to abolish the gold standard economy. His abolish of a gold standard economy lead to a new proposal on which the dollar would be back by.
A law has passed in 1764 known as the Currency Act to resolve the currency scarcity and lack of proper economic structure. It is design to illegalize any new model dollars, not even reprint already used money. Additionally, it simply demolishes the colonial cash by having a more “hard currency” network using pound sterling. A huge repercussion occur, when there is a massive trade deficit and it only made the overall economy much more dire. This policy not only damages the merchant, but it also did not financial help the British troop to get the economic resources they need.
At the end of World War Two, the Bretton Woods system was established for world currencies. This system involved countries fixing their currencies to the US Dollar, which in turn was tied to the value of gold at a fixed exchange rate of $35 per ounce. As this was a fixed exchange rate system it effectively forced countries to pursue a certain monetary policy, in order to keep their currency pegged to the Dollar and in turn the value of gold.
The graph shows the latest sterling exchange rate against most leading currencies which is the Brazilian Rate.
* The recent devaluation of Pound Sterling (£1) against the US Dollar ($1.5) means, Pret spend more money trading globally, compared to when the Pound Sterling (£1) much stronger than the US Dollar ($2). This will affect their annual profits or is likely to lead to unethical trading as they look for the cheapest sources to get their raw materials.
The main exchange rates exposures are: British pounds, Deutsch Mark, Japanese Yen and Belgian Francs.
3. The Director of Foreign Exchange hold same opinion with Group Vice President who supported pound sterling funding, but with different reasons. He considered pound sterling as a currency which was as weak as oil price. Borrowing in sterling will create a profit center rather