Currency Profile Of British Pound (Part I)
12:40 AM
GBP/USD is the most liquid currency pair in the world and is highly popular with the currency traders. 90% of the global currency trading is pure speculation by the market players. Why is GBP so popular with the currency traders? What are the strength and weakness of GBP? Lets discuss the currency profile of GBP. Another name for the British Pound (GBP) is Pound Sterling. GBP is also known as the Cable. This name most probably struck in the early part of the twentieth century when most of the global trading used to be done through GBP via telex machines run on the cables. GBP used to be the international reserve currency of choice in those days. United Kingdom (UK) is the fourth largest economy in the world. UK has a service oriented economy with manufacturing representing a small part of GDP. Manufacturing is only equivalent to one fifth of GDP.
The British capital market systems are one of the most developed in the world and as a result finance and banking has become a strong contributor to the GDP. London is still the forex center of the world. London Stock Exchange is still the second most important stock exchange in the world after the New York Stock Exchange.
UK has large reserves of oil and gas in its North Sea. Offshore drilling has made the energy production industry account for 10% of GDP which is one of the highest shares of any industrialized nation. UK is the largest producer and exporter of natural gas to EU although majority of UK GDP is from services.
This is important for forex traders as increases in energy prices such as oil will significantly benefit the large number of UK oil exporters. Overall, UK is a net importer of goods with a consistent trade deficit.
The largest trading partner of UK is the EU with the trade between the two accounting for almost 50% of UK imports and exports activities. The United States on an individual basis still remains UKs largest trading partner.
The leading import sources for UK are Germany, France, United States, Belgium and the Netherlands. The leading exports markets for UK exporters are the United States, France, Germany, Ireland and the Netherlands.
The possibility of Euro adoption will still be in the backs of minds of pound traders for many years to come. UK had rejected adopting Euro as its currency in June 2003. Now, if UK decides to join EMU, it will have significant ramifications for its economy.
One of the primary arguments used against adopting the Euro is that UK has sound macroeconomic policies that have worked very well for the country. The most important of these ramifications is the adjustment of UK interest rate with the Eurozone interest rate in case UK decides to join EMU.
Right now Brits are not in favor of a Euro entry. There are many arguments in favor of Euro entry and many against.UK is a highly political country with government officials highly concerned about the voter approval ratings. The voter opinion can change overtime. However, the likelihood of EMU entry will decline if the voters do not support Euro entry.
Bank of England: The Bank of England (BOE) is the UKs central bank. The Monetary Policy Committee is the nine member committee that sets the monetary policy for UK. It consists of a governor, two deputy governor, two executive directors of the central bank and four outside experts. The committee was granted operational independence in 1997.
The British capital market systems are one of the most developed in the world and as a result finance and banking has become a strong contributor to the GDP. London is still the forex center of the world. London Stock Exchange is still the second most important stock exchange in the world after the New York Stock Exchange.
UK has large reserves of oil and gas in its North Sea. Offshore drilling has made the energy production industry account for 10% of GDP which is one of the highest shares of any industrialized nation. UK is the largest producer and exporter of natural gas to EU although majority of UK GDP is from services.
This is important for forex traders as increases in energy prices such as oil will significantly benefit the large number of UK oil exporters. Overall, UK is a net importer of goods with a consistent trade deficit.
The largest trading partner of UK is the EU with the trade between the two accounting for almost 50% of UK imports and exports activities. The United States on an individual basis still remains UKs largest trading partner.
The leading import sources for UK are Germany, France, United States, Belgium and the Netherlands. The leading exports markets for UK exporters are the United States, France, Germany, Ireland and the Netherlands.
The possibility of Euro adoption will still be in the backs of minds of pound traders for many years to come. UK had rejected adopting Euro as its currency in June 2003. Now, if UK decides to join EMU, it will have significant ramifications for its economy.
One of the primary arguments used against adopting the Euro is that UK has sound macroeconomic policies that have worked very well for the country. The most important of these ramifications is the adjustment of UK interest rate with the Eurozone interest rate in case UK decides to join EMU.
Right now Brits are not in favor of a Euro entry. There are many arguments in favor of Euro entry and many against.UK is a highly political country with government officials highly concerned about the voter approval ratings. The voter opinion can change overtime. However, the likelihood of EMU entry will decline if the voters do not support Euro entry.
Bank of England: The Bank of England (BOE) is the UKs central bank. The Monetary Policy Committee is the nine member committee that sets the monetary policy for UK. It consists of a governor, two deputy governor, two executive directors of the central bank and four outside experts. The committee was granted operational independence in 1997.
About the Author:
Mr. Ahmad Hassam has done Masters from Harvard University. He is interested in day trading stocks and currencies. Try These 1500 Pips A Day Forex Signals From Heaven. Know Forex Rebellion!
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