GBP/USD – Live and Historical Rates
Known as the “Cable”, the GBPUSD pair is one of the major global currency pairs, with both the US and UK economies in the top five largest globally. The chart above illustrates the amount of US Dollars it takes to purchase a GB Pound.
The British Pound is a major currency. It is the oldest currency in the world still in circulation, the fourth most traded currency globally and the third most popular reserve currency after the US Dollar (USD) and the Euro (EUR). Britain has for years resisted adopting the Euro and now with UK leaving the EU after Brexit, it has become clear that the Pound (GBP) is here to stay. The Bank of England is the central bank in the UK and therefore can have a significant impact of the level of the Pound, which we will look at below. You can read an in-depth History of the Pound here.
The US Dollar
The world’s top reserve currency, the US Dollar dominates international trade on every level, to a massive extent. The US Dollar supply is controlled by the US central bank, which is the Federal Reserve. Although the US Dollar has been predicted to eventually cede its globally dominant position to the Euro, the US currency remains the key global reserve currency and a safe haven in times of crisis. This was particularly true in March 2020 as the COVID-19 global pandemic spread from Asia to Europe and into the US. The US Dollar’s importance is also supported by the US being the largest global economy, with its massive energy, manufacturing, finance and agricultural sectors.
The US dollar is the world’s most traded currency by far, as well as the largest reserve currency. The US Dollar is backed by the largest single economy in the world. Commodities, manufacturing, energy and finance are all major components of the US economy. Also called the petro-dollar, it is the currency in which most commodities – like gold and oil – are almost exclusively traded. The world’s top reserve currency, the US Dollar dominates international trade on every level.
It is the standard to which most of today’s international currencies were pegged at one point or another in the post-World War II era, since the Bretton Woods Agreement. You can read more about the US Dollar from past to present in our article here on The History of Forex Markets. To this day, the currencies of 23 countries are still pegged to the US Dollar.
The supply of US Dollars is controlled by the US central bank, which is the Federal Reserve. They also exercise control of interest rates, which impacts the level of the US Dollar, as we look at below.
What moves GBPUSD?
The below are the primary influences on the level of the GBPUSD Forex (foreign exchange) rate.
- The existing and expected interest rate policies of the Federal Reserve (Fed) and the Bank of England (BoE) have substantial influences on level of the GBPUSD Forex rate.
- The anticipation of future interest rate is one of the most significant factors for the current and future level for GBPUSD. Whether either of the two central banks (the Fed or BoE) are moving towards a more hawkish or more dovish outlook is key for the GBPUSD Forex rate. For more information regarding dovish and hawkish please see our article here. https://www.fxexplained.co.uk/forex-education/fundamental-and-macroeconomic-analysis/hawk-dove-sheet/
- It is the differential of the interest rates between the Fed and BoE that is significant, alongside their Quantative Easing (QE) programs, that impacts the GBPUSD Forex rate.
- The present and future strength of both the US and the UK economies also influences the GBPUSD Forex rate. The strength and relative strength of the two economies is indicated by the economic data from the two nations. Stronger data for an economy would typically result in a stronger currency versus the other currency, given other factors being equal.
- Geopolitical occurrences also influence the GBPUSD rate. For example, at different times, the Brexit negotiations and progresses had negative and positive impacts on the Pound and GBPUSD. The US and China trade war during the Trump Presidency impacted the US dollar and therefore GBPUSD.
- Because of Britain’s geographical proximity to the Eurozone and the economic ties it has with the EU in general, the GBPUSD Forex rate is closely correlated with EURUSD, about which you can read more here https://www.fxexplained.co.uk/rates/forex-charts/eurusd/.