Cart review: GBPUSD currency pair

The GBPUSD currency pair is one of the most liquid in Forex. Spreads are tight and arbitrage opportunities are nearly impossible. The liquidity of the pair along with the availability of many trading instruments makes it GBPUSD is a great choice for Forex traders, both beginners and advanced.

As with a currency pair EURUSD, the most important factor in shaping the relationship between currencies is the relative strength of the economies of Great Britain and the United States. When the US economy outperforms the UK, the dollar tends to strengthen against the pound. On the other hand, if the UK economy performs better than the US economy, the dollar tends to weaken against the pound.

This relative strength is often reflected in domestic interest rates. For this reason, investors should carefully watch the relationship between the interest rates of both countries. In addition, since both the US and the UK have a highly developed financial market, the performance of their financial sectors will also be important in determining relative currency movements.

READ NECESSARY: Bank of England (BoE) - guardian of the British pound

A very unique feature of the British pound trading is the speculation as to whether the UK will join Eurozone. Imagine that it actually happened. In this case, the UK would have to forgo the pound and use the euro as its national currency.

It is widely believed that if Great Britain joins the Eurozone, it will first have to devalue the pound. As a consequence, when UK politicians speak favorably about the possibility of joining the Eurozone, the pound usually depreciates. When British politicians speak out against joining the Eurozone, the pound tends to strengthen.

The UK economy and GBPUSD

Although it is a relatively small country in terms of area, the UK economy is among the largest in the world. The pound sterling (or simply the pound) plays a significant role in the international financial market, which makes it attractive to investors in Forex market. For several centuries, Great Britain was one of the most powerful countries in the world. Its economy was the largest in the world and international trade dominated this small island nation. During this period, the British pound served as the unofficial reserve currency worldwide. In the aftermath of two world wars, Britain entered a period of relative slowdown. The United States, in turn, has risen to the position of the most dominant economic power in the world.

The development of Great Britain also slowed down as a result of difficult government regulations, and strict labor law inhibited economic activity. However, the United Kingdom remained quite prosperous, and from 1980 it regained much of the previously lost economic power. This increase coincided with the UK's position as an important center of global finance. The direction and strength of the financial sector of Great Britain plays a huge role in shaping the strength of its economy.

Although Great Britain is (still) a member of the European Union, it is still outside the Eurozone and has kept its currency, the pound sterling. Before the US dollar became the world's reserve currency, the British pound held this position for over a century. The pound remains an important currency and is a popular trading target for all Forex investors. The GBPUSD currency pair has earned the nickname "cable" among investors, in reference to the primary markets when it bid BID and ASK were laid between New York and London by cables running under the waters of the Atlantic Ocean.