What is the pound US currency? Introduction to the Standard of Pound US Exchange Rate

2023-06-05
Summary:

Learn about the exchange rate between GBP and USD is important in forex trading. Understand the basics of the GBP exchange rate for trading strategies.

Pound US dollar is the abbreviation for pound to dollar, with the symbol GBPUSD.

What is the pound US currency? Introduction to the Standard of Pound US Exchange Rate

London, as the most active international financial center for currency trading, has greatly benefited the pound. The pound was once the world currency, but it is still the favorite and most valuable currency for speculators, with a relatively high exchange rate against the US dollar. The daily fluctuations of the pound are also significant, but its trading volume is far inferior to the euro. Not only in the straight market, but also in the cross market of sterling, there is high volatility. One of the main reasons is that London, as the earliest foreign exchange trading center, has top-notch skills and experience in currency traders, which are well reflected in the trend of sterling. Due to the above reasons, the pound has a particularly speculative component compared to the euro, and this characteristic is particularly evident in short-term fluctuations. Short term operation of the pound is a touchstone that tests investors' skills. It is recommended that traders with immature experience and skills stay away from the pound.


Whether geographically or economically, the pound is a European currency. The UK is closely related to the economy and politics of the eurozone, as can be seen from the main targets of UK imports and exports. It is precisely because of this close connection that the economic and political changes in the EU have a significant impact on the pound. However, if the UK joins the eurozone, its interest rate level must be lowered to the euro rate level, so any talk about the possibility of UK joining the eurozone will dampen the pound's exchange rate. In addition, due to the UK's possession of oil in the North Sea, the rise in oil prices has to some extent benefited the pound. Of course, this is under the same other conditions.


Exchange rate standards

1. Benchmark interest rate. The Bank of England is the central bank of the United Kingdom. It is responsible for setting the main interest rate, which is the minimum lending rate, also known as the base rate. In the first week of each month, the Bank of England uses interest rate adjustments to send clear monetary policy signals to the market. Due to interest rate differentials being the main cause of international capital flows, changes in benchmark interest rates typically have a significant impact on the pound.


2.10 year gilt bond yield. The difference in yields between UK gilts and other countries' bonds or US Treasury bills during the same period can also greatly affect the exchange rate between the pound and other currencies.


3. Important UK economic data. The main economic data for the UK include: initial unemployment rate, average income, retail price index, industrial production value, GDP, purchasing managers' index, manufacturing and service industry survey reports.


4.3 month European pound deposit futures. The price of this contract reflects the market's expectations for the European pound deposit rate in three months, and the difference in futures contract prices compared to other countries over the same period is also likely to be due to changes in the British pound exchange rate.


5. The main trading partners of the UK. The main export targets of the UK are the United States and the eurozone, while the main import targets of the UK are also the United States and the eurozone. Once these trading partners encounter unexpected events, which lead to changes in the trade situation, it will also lead to changes in the pound US interest rate.


【 EBC Platform Risk Reminder and Disclaimer 】: There are risks in the market, and investment needs to be cautious. This article does not constitute investment advice.

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