The British Pound (The British Pound (£)£)

Tom DegnanTom Degnan Davin CostaDavin Costa

Tom LacnyTom Lacny Brian BillickBrian Billick

Manuel DavilaManuel Davila

Schedule of EventsSchedule of Events

Current Status of the PoundCurrent Status of the Pound Historical Graphs of the PoundHistorical Graphs of the Pound Short Term Analysis and ForecastShort Term Analysis and Forecast Long Term Analysis and ForecastLong Term Analysis and Forecast

Current Status of the PoundCurrent Status of the Pound

Trading at 11 year highs against USDTrading at 11 year highs against USD

1992 George Soros – “Man who broke the British Pound.”1992 George Soros – “Man who broke the British Pound.”

What is fueling the rally of the pound?What is fueling the rally of the pound?

1. Strong UK fundamentals – Hiking bias1. Strong UK fundamentals – Hiking bias

2. US Dollar weakens2. US Dollar weakens

3. Technical Outlook3. Technical Outlook

4. Short Term Fundamentals Favor Gains4. 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 History and Graphs of the British PoundBritish Pound

History of British CurrencyHistory of British Currency England was unified under William the Conqueror in 1066England was unified under William the Conqueror in 1066 The Pound (GBP) was introduced into England by the Normans even The Pound (GBP) was introduced into England by the Normans even

before William I conquered England. The principle subdivisions of the before William I conquered England. The principle subdivisions of the Pound Sterling (or Gold Sovereign) were into 20 Shillings or 240 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 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 Pounds), Crown (5 Shillings), Florin (2 Shillings) and Farthing (1/4 Pence). Pence).

The Bank of England was created on July 27, 1694 The Bank of England was created on July 27, 1694 The United Kingdom left the Gold Standard several times, only to The United Kingdom left the Gold Standard several times, only to

keep reinstating it until it was finally abandoned on June 23, 1972. keep reinstating it until it was finally abandoned on June 23, 1972. Throughout this time period, the rate at which the Bank of England Throughout this time period, the rate at which the Bank of England would buy gold remained constant at 3 pounds, 17 shillings, 10.5 would buy gold remained constant at 3 pounds, 17 shillings, 10.5 pence.pence.

Exchange rate controls were finally abolished in 1979.Exchange rate controls were finally abolished in 1979. (All of the above can be found at:(All of the above can be found at: ((

http://www.globalfindata.com/frameset.php3?location=/gh/index.htmlhttp://www.globalfindata.com/frameset.php3?location=/gh/index.html) )) )

CoinCoin Written AsWritten As Spoken AsSpoken As Circulation DatesCirculation Dates How expressed in £ s dHow expressed in £ s d

farthingfarthing 1/4d1/4d 1279-19561279-1956

half pennyhalf penny 1/2d1/2d hape-neehape-nee 886-1967886-1967

pennypenny 1d1d ?-1967?-1967

silver threepencesilver threepence 3d3d thrippencethrippence 1551-19441551-1944

groatgroat 4d4d 1279-18881279-1888

sixpencesixpence 6d6d a tannera tanner 1550-19671550-1967

shillingshilling 1/-1/- a boba bob 1548-19671548-1967 1s 0d1s 0d

florinflorin 2/-2/- 1849-19671849-1967 2s 0d2s 0d

half-a-crownhalf-a-crown 2/62/6 half a dollarhalf a dollar 1526-19671526-1967 2s 6d2s 6d

crowncrown 5/-5/- a dollara dollar 1544-current*1544-current* 5s 0d5s 0d

nobelnobel 6s 8d6s 8d 1464-16421464-1642 6s 8d6s 8d

poundpound 20/-20/- a quida quid ?-current?-current £1 0s 0d£1 0s 0d

sovereignsovereign 20/-20/- ?-?**?-?** £1£1

half-sovereignhalf-sovereign 10/-10/- ?-?**?-?** 10s10s

guineaguinea 21/-21/- 1663-1813***1663-1813*** £1 1s 0d£1 1s 0d

British Currency after 1971British Currency after 1971

On February 15, 1971, Britain adopts the decimal system On February 15, 1971, Britain adopts the decimal system The change essentially made one British Pound equal to 100 The change essentially made one British Pound equal to 100

pence.pence. The 5 pence piece replaces the shilling, and the 10 pence The 5 pence piece replaces the shilling, and the 10 pence

piece was introduced to replace the florinpiece was introduced to replace the florin Both the half-penny and half-crown were removed from Both the half-penny and half-crown were removed from

circulationcirculation Banks were closed for 4 days in order to fully embrace the Banks were closed for 4 days in order to fully embrace the

new currency ratesnew currency rates

Note: Previous chart obtained from (http://gouk.about.com/cs/literature/l/blbritcurr.htm)Note: Previous chart obtained from (http://gouk.about.com/cs/literature/l/blbritcurr.htm)

CopperCopper Smallest CoinSmallest Coin 1p1p One penceOne pence

2p2p Two penceTwo pence

SilverSilver Smallest Silver CoinSmallest Silver Coin 5p5p Five penceFive pence

10p10p Ten penceTen pence

Small 7 sided CoinSmall 7 sided Coin 20p20p Twenty penceTwenty pence

Large 7 sided CoinLarge 7 sided Coin 50p50p Fifty penceFifty pence

YellowYellow £1£1 One pound or quidOne pound or quid

£2£2 Two pound or quidsTwo pound or quids

NotesNotes GreenGreen £5£5 Five pounds or "a fiver"Five pounds or "a fiver"

Orange and greyOrange and grey £10£10 Ten pounds or "a tenner"Ten pounds or "a tenner"

BlueBlue £20£20 Twenty poundsTwenty pounds

There are notes of higher denominations, but these are not so common and you probably There are notes of higher denominations, but these are not so common and you probably won't see them in general circulation.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 dayslatest (Feb 18) - 0.00499321 lowest (Dec 14) -

0.00492261 highest (Nov 19) -

0.0052299

British Pounds to 1 CHF

120 dayslatest (Feb 18) - 0.446398 lowest (Aug 27) - 0.434922 highest (Nov 19) - 0.464078

British Pounds to 1 CAD

120 dayslatest (Feb 18) - 0.42926lowest (Dec 20) - 0.417414highest (Nov 12) - 0.45224

British Pounds to 1 USD

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

British Pounds to 1 EURBritish Pounds to 1 EUR

120 days

•latest (Feb 18) - 0.69001

•lowest (Aug 27) - 0.671001

•highest (Dec 30) - 0.708792

GBP Short Term GBP Short Term ForecastForecast

Current Economic ConditionsCurrent Economic Conditions The UK has experienced 44 consecutive quarters of The UK has experienced 44 consecutive quarters of expansionexpansion

Bank of England enacted a highly restrictive monetary Bank of England enacted a highly restrictive monetary policy raising rates on 5 consecutive occasions last policy raising rates on 5 consecutive occasions last yearyear

UK faces rapidly growing trade deficit which could UK faces rapidly growing trade deficit which could force a downward adjustment in the currency . The force a downward adjustment in the currency . The latest report showed a gap of –5300M GBP vs. latest report showed a gap of –5300M GBP vs. expectations of only –4750Mexpectations of only –4750M

GBP Short Term GBP Short Term ForecastForecast

2005 Implications2005 Implications Short GBP futures not pricing at a rate hike over the Short GBP futures not pricing at a rate hike over the next yearnext year

Bank of England has the option of materially easing Bank of England has the option of materially easing monetary policy should growth in UK rapidly monetary policy should growth in UK rapidly deteriorate. deteriorate.

Large interest rate differential between GBP and USD Large interest rate differential between GBP and USD has raised speculative positions from carry traders. has raised speculative positions from carry traders. Increases volatility and speculation effect on currency Increases volatility and speculation effect on currency value.value.

Political fortune of Tony Blair and the Labor party is at Political fortune of Tony Blair and the Labor party is at stake. stake.

GBP Short Term GBP Short Term ForecastForecast

PredictionPrediction The British Pound will encounter a short term The British Pound will encounter a short term

downtrenddowntrend

Great Britain PoundGreat Britain Pound

Long-Term ForecastLong-Term Forecast

UK Trade£3.0 billion deficit in Dec 2004

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

The Numbers… The Numbers…

BALANCE OF PAYMENTS AND TRADE Period Release date (Billion)UK's trade balance (£ billion) 4-Dec 9/2/05 -3Balance of Payments current account - BoP (£ billion) Q3/04 23/12/04 -8.8of which: EU     -6.4non-EU     -2.4Goods export volumes -excluding oil and erratics 4-Dec 9/2/05 104.4

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

The Facts…The Facts…

The deficit on trade in goods in December was £4.4 billion – £0.3 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 billion less than the deficit for November. The deficit with the enlarged EU worsened to £2.4 billionenlarged EU worsened to £2.4 billion

The value of exports to non-EU increased across a wide range of The value of exports to non-EU increased across a wide range of manufactured goods. As a result the deficit with non-EU countries manufactured goods. As a result the deficit with non-EU countries improved to £2.1billion.improved to £2.1billion.

The European Commission has announced its support for 10 more The European Commission has announced its support for 10 more countries to join the EU from the beginning of 2004.Taken countries to join the EU from the beginning of 2004.Taken together these countries accounted for 2% of UK exports and 2% together these countries accounted for 2% of UK exports and 2% of UK imports in 2001.of UK imports in 2001.

The Bottom Line… The Bottom Line…

Increasing Trade Deficit with the EUIncreasing Trade Deficit with the EU Increasing number of countries that Increasing number of countries that

trade with the UK are joining the EUtrade with the UK are joining the EU Could lead to an increase in trade Could lead to an increase in trade

deficit in the future - which would deficit in the future - which would mean excess supply and devaluation mean excess supply and devaluation

CITY GUIDE TO A UK EURO CITY GUIDE TO A UK EURO CHANGEOVERCHANGEOVER

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