GBP/USD

History of GBP USD Trading

For most of the 1800s, right up until the First World War, £1 was valued at a small fraction under $5. The Britain pound was the biggest currency globally, with over 60% of global debt being held in sterling, pre-WW1. The US dollar caught up in the early 1920s, and by 1944, with the conception of the Bretton-Woods monetary system, the pound to dollar exchange rate was pegged at £1:$4.03. In 1971, the Britain pound became a free-floating currency as the Bretton-Woods system failed. Simultaneously the US dollar became free-floating, and the US decided to drop the gold standard.

As a general rule of thumb, since the pound was allowed to free-float against the dollar, the nominal value of the Britain pound depreciated over time, allowing people to believe that the pound was slowly weakening. Research by Dr Mike Staunton Prof. Paul Marsh and Prof. Elroy Dimson, of the London Business School, suggests that, since World War 2, the GBP/USD pairing has remained effectively level in real terms.