A guide about exchange rates surrounding Pounds and US Dollars.
Exchange rate history between Pounds to Dollars
The pound was a unit of account keeping in Anglo-Saxon England. One pound equalled 240 silver pennies, which totalled to weigh exactly one pound. The modern day Pound Sterling evolved from here. Initial dollar coins in the US resembled Spanish Dollars and until 1857 the use of US Dollars, Spanish Dollars and Mexican Pesos as legal tender was rather common.
The US dollar (USD, $) remains the most frequently traded currency in the world, and the British pound sterling (GBP, £) stands at number four. In 2013, both these currencies put together accounted for almost half of all global exchange transfers, with the USD and the GBP playing the role of anchors in the global economy. Governments of both countries rely on floating exchange rate agreements and neither placed restrictions on the international flow of capital.
Pound historically strong against the US Dollar
From 1914, when Britain started using inconvertible paper money, to 1919, the GBP valued at around USD 4.70. When Britain re-adopted a form of the Gold Standard in 1925, it fixed the value of one GBP to around USD 4.87. Britain left the Gold Standard in 1931, which saw the floating pound drop to about USD 3.69. By 1934, though, the pound got to its highest ever mark of USD 5.
Beginning of the World War II saw the value of the GBP fall to USD 3.99 and it dropped to $3.27 by 1940. The removal of exchange rate controls took place in 1947, and by 1949 the pound valued at USD 2.80. With the British economy going through a crisis, the pound dropped further to USD 2.40 by 1967.
The devaluation of the pound in 1967 saw its exchange rate fixed at USD 2.40. In 1971 the United States suspended the provision of freely converting between gold and currency and Britain floated the pound around the same time. This led to the free trading of currency as is the norm today.
From 1990 to 2000, the value of the pound stood in between USD 1.50 and USD 1.70. The global financial crash of 2008 altered this landscape. The value of GBP dropped to around USD 1.3, before slowly regaining some of the losses to reach USD 1.71 in 2014. Since then, Brexit – Britain’s decision to leave the European Union – has put an end to the fleeting stability of GBP. In October 2016, GBP reached a record 31-year low against the US dollar – at 1.22. It has remained roughly around this level through to 2017, with recoveries to approximately USD 1.3 expected at the beginning of UK summertime.Back to top
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Dollar fluctuates against a weaker pound
After both these countries started following liberal foreign policies from the late 1970s, there have been notable fluctuations in the GBP to USD exchange rate. When Britain’s government decided to do way with policies that aimed at keeping the value of the pound higher than its actual market value, its value dropped noticeably.
In February 1985, the GBP got to its lowest ever point of USD 1.09. It did recover quickly, though, mainly owing to the Plaza Accord that worked in lowering the value of the USD against other major currencies in between 1985 and 1987. In November 1991 and February 1992 the pound crossed the USD 1.95 mark, but a range of factors saw it drop to USD 1.55 by December 1992.
Since 1992, United States and Britain have permitted free floating of currency in the market. From 1994 to 2000, the value of the pound stood in between USD 1.50 and USD 1.70. In remained below the USD 1.50 mark for most of 2001 and 2002, and shot back up to over $1.90 in December 2004.
Increased interest rates by the Bank of England in order to curb inflation saw the pound appreciating against most major currencies, and it got to a 20-year high of USD 2.07 in November 2007. The economic downturn that followed had a negative effect on the GBP, and it dropped to USD 1.417 by March 2009.
After signs of economic stability in 2010, value of the GBP has remained in between USD 1.50 and USD 1.70. While the GBP has strengthened against many currencies owing to strong economic performance, factors like lower oil prices, higher gas production and better employment numbers have worked in favour of the USD. From July 2015 to January 2015, the pound lost more than 11%, dropping from USD 1.706 to USD 1.514.