The British Pound

The British Pound (£)

• Tom Degnan Davin Costa
• Tom Lacny Brian Billick
• Manuel Davila

Schedule of Events

• Current Status of the Pound
• Historical Graphs of the Pound
• Short Term Analysis and Forecast
• Long Term Analysis and Forecast

Current Status of the Pound

• Trading at 11 year highs against USD
• 1992 George Soros – “Man who broke the British Pound.”
• What is fueling the rally of the pound?
• 1. Strong UK fundamentals – Hiking bias
• 2. US Dollar weakens
• 3. Technical Outlook
• 4. Short Term Fundamentals Favor Gains

	Friday, February 18, 2005
	1 GBP	in GBP
American Dollar	1.8949	0.527732
Australian Dollar	2.40531	0.415747
Brazilian Real	4.86232	0.205663
Canadian Dollar	2.32959	0.42926
Chinese Yuan	15.6831	0.0637627
Danish Krone	10.7886	0.0926903
Euro	1.44925	0.69001
Hong Kong Dollar	14.7791	0.0676632
Indian Rupee	82.864	0.012068
Japanese Yen	200.272	0.00499321
Malaysian Ringgit	7.20062	0.138877
Mexican Peso	20.987	0.0476486
New Zealand Dollar	2.61474	0.382448
Norwegian Kroner	12.011	0.0832569
Singapore Dollar	3.10442	0.322122
South African Rand	11.25	0.0888887
South Korean Won	1940.38	0.000515363
Sri Lanka Rupee	188.069	0.0053172
Swedish Krona	13.2018	0.0757474
Swiss Franc	2.24015	0.446398
Taiwan Dollar	59.6136	0.0167747
Thai Baht	73.0863	0.0136824
Venezuelan Bolivar	3629.11	0.000275549

History and Graphs of the British Pound

History of British Currency

• England was unified under William the Conqueror in 1066
• The Pound (GBP) was introduced into England by the Normans even before William I conquered England. The principle subdivisions of the Pound Sterling (or Gold Sovereign) were into 20 Shillings or 240 pence, but it was also divisible into the Guinea (21 Shillings or 1.05 Pounds), Crown (5 Shillings), Florin (2 Shillings) and Farthing (1/4 Pence).
• The Bank of England was created on July 27, 1694
• The United Kingdom left the Gold Standard several times, only to keep reinstating it until it was finally abandoned on June 23, 1972. Throughout this time period, the rate at which the Bank of England would buy gold remained constant at 3 pounds, 17 shillings, 10.5 pence.
• Exchange rate controls were finally abolished in 1979.
• (All of the above can be found at: (http://www.globalfindata.com/frameset.php3?location=/gh/index.html) )

Coin	Written As	Spoken As	Circulation Dates	How expressed in £ s d
farthing	1/4d		1279-1956
half penny	1/2d	hape-nee	886-1967
penny	1d		?-1967
silver threepence	3d	thrippence	1551-1944
groat	4d		1279-1888
sixpence	6d	a tanner	1550-1967
shilling	1/-	a bob	1548-1967	1s 0d
florin	2/-		1849-1967	2s 0d
half-a-crown	2/6	half a dollar	1526-1967	2s 6d
crown	5/-	a dollar	1544-current*	5s 0d
nobel	6s 8d		1464-1642	6s 8d
pound	20/-	a quid	?-current	£1 0s 0d
sovereign	20/-		?-?**	£1
half-sovereign	10/-		?-?**	10s
guinea	21/-		1663-1813***	£1 1s 0d

British Currency after 1971

• On February 15, 1971, Britain adopts the decimal system
• The change essentially made one British Pound equal to 100 pence.
• The 5 pence piece replaces the shilling, and the 10 pence piece was introduced to replace the florin
• Both the half-penny and half-crown were removed from circulation
• Banks were closed for 4 days in order to fully embrace the new currency rates
• Note: Previous chart obtained from (http://gouk.about.com/cs/literature/l/blbritcurr.htm)

Copper	Smallest Coin	1p	One pence
		2p	Two pence
Silver	Smallest Silver Coin	5p	Five pence
		10p	Ten pence
	Small 7 sided Coin	20p	Twenty pence
	Large 7 sided Coin	50p	Fifty pence
Yellow		£1	One pound or quid
		£2	Two pound or quids
Notes	Green	£5	Five pounds or "a fiver"
	Orange and grey	£10	Ten pounds or "a tenner"
	Blue	£20	Twenty pounds
	There are notes of higher denominations, but these are not so common and you probably won't see them in general circulation.

• Note: Chart and above info obtained from (http://gouk.about.com/cs/photoswebcams/l/bldecandmec.htm)

• British Pounds to 1 JPY

• 120 days
• latest (Feb 18) - 0.00499321
• lowest (Dec 14) - 0.00492261
• highest (Nov 19) - 0.0052299

• British Pounds to 1 CHF

• 120 days
• latest (Feb 18) - 0.446398
• lowest (Aug 27) - 0.434922
• highest (Nov 19) - 0.464078

• British Pounds to 1 CAD

• 120 days
• latest (Feb 18) - 0.42926
• lowest (Dec 20) - 0.417414
• highest (Nov 12) - 0.45224

• British Pounds to 1 USD

• 120 days
• latest (Feb 18) - 0.527732
• lowest (Dec 20) – 0.513294
• highest (Sep 7) – 0.56392

British Pounds to 1 EUR

• British Pounds to 1 EUR

• 120 days
• latest (Feb 18) - 0.69001
• lowest (Aug 27) - 0.671001
• highest (Dec 30) - 0.708792

GBP Short Term Forecast

• Current Economic Conditions
• The UK has experienced 44 consecutive quarters of expansion
• Bank of England enacted a highly restrictive monetary policy raising rates on 5 consecutive occasions last year
• UK faces rapidly growing trade deficit which could force a downward adjustment in the currency . The latest report showed a gap of –5300M GBP vs. expectations of only –4750M

GBP Short Term Forecast

• 2005 Implications
• Short GBP futures not pricing at a rate hike over the next year
• Bank of England has the option of materially easing monetary policy should growth in UK rapidly deteriorate.
• Large interest rate differential between GBP and USD has raised speculative positions from carry traders. Increases volatility and speculation effect on currency value.
• Political fortune of Tony Blair and the Labor party is at stake.

GBP Short Term Forecast

• Prediction
• The British Pound will encounter a short term downtrend

Great Britain Pound

• Long-Term Forecast

• UK Trade
• £3.0 billion deficit in Dec 2004

• http://www.statistics.gov.uk/CCI/nugget.asp?ID=199

The Numbers…

• http://www.statistics.gov.uk/instantfigures.asp

The Facts…

• The deficit on trade in goods in December was £4.4 billion – £0.3 billion less than the deficit for November. The deficit with the enlarged EU worsened to £2.4 billion
• The value of exports to non-EU increased across a wide range of manufactured goods. As a result the deficit with non-EU countries improved to £2.1billion.
• The European Commission has announced its support for 10 more countries to join the EU from the beginning of 2004.Taken together these countries accounted for 2% of UK exports and 2% of UK imports in 2001.

The Bottom Line…

• Increasing Trade Deficit with the EU
• Increasing number of countries that trade with the UK are joining the EU
• Could lead to an increase in trade deficit in the future - which would mean excess supply and devaluation

CITY GUIDE TO A UK EURO CHANGEOVER

• CHART 1: A UK EURO CHANGEOVER Notes: D = Government decision to join; R = Referendum; T = UK entry: fixed conversion rate; sterling wholesale financial markets in euro; RT = full-scale retail payment and transaction processing infrastructure and services available; E = end of transition period; euro notes and coin introduced as legal tender in the UK; S = end of legal tender for sterling notes and coin.

• http://www.bankofengland.co.uk/Links/setframe.html