For most of the 1800s, until the outbreak of world war I, 1 pound was valued at a small fraction below $ 5. In exceptional cases during the American civil war, the pound temporarily rose to $ 10. The pound sterling was the most significant currency in the world, more than 60% of the world’s debt was in pounds sterling, before the First world war. Us dollar caught up in the early 1920s, and by 1944, with the concept of the Bretton woods monetary system (the idea that the dollar would be pegged to the price of gold and become the private reserve of the world), the pound-to-dollar Rate was pegged to £ 1: $ 4.03.
In 1971, the pound became a free-floating currency as the Bretton Wood system slowly collapsed. At the same time, the US dollar became free-floating, and the US decided to abandon the gold standard.
As a general rule of thumb, since the pound was allowed to float freely against the dollar, the nominal value of the pound depreciated over time, leading people to believe that the pound was gradually weakening. However, if you take inflation into account, you get a slightly different picture. Studies conducted by Professor ELRA Dimson, Professor Paul Marsh and Dr. Mike Staunton of the London business school show that mating in real terms remained virtually equal after world war II.
In recent history, there are two cases where GBP/USD has collapsed, meaning that the pound has depreciated against the dollar, or the dollar has risen against the pound.
Many factors will affect the two currencies as a whole, and concerning each other in the long run. Changes in: GDP, employment, interest rates, inflation rates, and political shifts in the national economy will affect the respective currency accordingly.
Monetary policy is one of the most critical factors affecting GBP/USD. Communication from both Central banks can be one of the main factors determining the value of a currency pair. The British Bank of England renegotiates the interest rate every month, while the US Federal reserve renegotiates rates eight times a year. The factor specific to the pound sterling at the moment is Brexit. Britain’s relationship with the EU, whatever it is, will be a massive influence in the foreseeable decade.
Theoretically, you can trade currency pairs 24/7, but there are better times to trade GBP/USD when the currency pair is more volatile. GBP/USD is busy from 06:00 to 16:00 (GMT).
GBP/USD is one of the four” majors ” in the Forex market – majors represent currency pairs with the highest daily trading volumes. Plus, of course, it is one of the oldest traded currency pairs on the market. A person can trade GBP/USD with a Forex contract, or he can purchase a contract for difference (CFD) on a particular currency pair and speculate on the difference in price.
A CFD is a financial instrument, usually between a broker and an investor, where one party agrees to pay the other the difference in the value of the security between the beginning and the end of the transaction. You can hold a long position (assuming the price goes up) or a short position (assuming the price drops). This is considered a short-term investment or trade as CFDs are generally used for a limited period.
For example, to trade the GBP/USD currency pair using CFDs, you are thinking about the direction of the underlying asset. If you feel that the pound will rise in price, then open a long position by buying CFD. If you think the pound will lose its value against us dollar, you will open a short position by selling CFDs.