The Risk Still Looms

The pound sterling is the third most commonly traded currency in the forex market and incidentally, the oldest currency still around. It originates from way back before the Magna Carta, when there was no United Kingdom and the British Isles were divided between the warrior kingdoms of the Anglo-Saxons. These kingdoms used a currency known as the sterling. After some considerate devaluation, what today would be known as inflation, these coins begun to be weighed by the pound when settling payments, thus originating the pound sterling, which is simply an abbreviation of “a pound of sterlings”. After the Norman Conquest the pound sterling was subdivided into 20 shillings and 240 pence, a system that lasted until Britain adopted the decimal coinage system in 1971.

Like any good old fashioned currency the pound sterling has many nicknames. The most often used colloquial name is the “quid” possibly derived from the location of the British mint in Quidhampton, but more probably from the Latin phrase “quid pro quo” which literally means an exchange of goods. In the forex world however, the pound sterling is more likely to be called “cable”. This is due to the fact that before the invention of the radio, GBP/USD quotes had to be transmitted through transatlantic cables, thus giving birth to the pound’s current nickname.

In recent years, the GBP has been harshly affected by the global market crisis, particularly during 2008. Now, for the first time in history it seems that the pound may find itself at par with the Euro, which has proven to be more resilient in tough circumstances. The British however, do not see this as a good reason to join the European Monetary Union, claiming that by having their own currency they can better regulate their economy by increasing and decreasing interest rates. Hopefully this philosophy pans out as they hope, although the beginning of 2009 is yet to signal an end to the GBP’s seemingly endless plummet.