The GBP is a strong currency, and for many years it was a dominating currency. However, USD has taken this place after World War 2.
Today, the US Dollar may be the most powerful currency, but the British pound is still the most significant currency in the world, both economically and monetarily. It is the 3rd most held reserve and 4th most traded currency globally.
Yes, GBP is a strong currency and has been holding significance in the world. As a result of turbulence in the UK economy, the future of the British pound is uncertain. In addition to the Euro, which makes GBP difficult to forecast.
Many discussions are going on regarding the future of the British pound. Many say that the Brexit resolution and raising interest rates by the Bank of England may bring some recovery in the pound. However, there is a lot of uncertainty around.
Britain is one of the most powerful nations, so many people track the pound’s value worldwide. Many countries also keep their watch on the value of the GBP.
Various factors affect the British pound; we will see those in this post.
List of factors impacting the British pound
Inflation is one major reason that causes economic disruptions and may affect the country’s currency later.
When it comes to controlling inflation, promoting economic stability, rising interest rates, and enhancing employment, the Bank of England plays a major role. The Bank of England can take steps to help make all these things possible. They have all the tools and power to achieve these targets.
The main decision here is to balance the interest rates to curb inflation and achieve stability in the currency rate. When the country’s central bank raises the interest rates, it usually helps the currency’s value to rise. The reason is that it attracts foreign investors by controlling the inflation level.
The Bank of England has raised the interest rates recently and is committed to raising them even further if needed. And this trend is common throughout the world. So, the
interest rate is one major factor that may impact the future of the British pound.
You can visit https://capital.com/gbp-to-eur-forecast. In this piece of content, you will get all the details regarding the rate of the pound, and also you will get to know about the GBP/EUR forecast.
Price of Oil
Oil plays a major role in Britain’s economy, which later also affects the country’s currency. The UK is a big exporter of oil products. Due to its financial services industry’s strength, the country now plays a significant role in trading energy via the futures market. The major benchmark for the international oil trade is the price fluctuations of Brent crude.
The oil area assumes a significant part in the United Kingdom’s economy and enormously influences the country’s ongoing record balance. Lower oil creation and oil costs might prompt a debilitating of the GBP.
The country’s currency is significantly impacted by the degree of inflation. You may anticipate significant changes in the central bank’s impending monetary policies if inflation increases over its predetermined target level.
Experts often use the Consumer Price Index (CPI), published by the Office for National Statistics, to monitor inflation levels. It calculates the changes in the cost of goods and services for a specific time. A higher rate of inflation will generally depreciate the value of the currency.
Currently, the inflation level is high worldwide, and the UK is also one of them. So, you can expect some deterioration in the value of the pound. However, the string steps by the Bank of England can reduce inflation and also improve the health of the country’s currency.
Balance of Payments
Balance of payments, or BOP, alludes to the contrast between cash entering and leaving a country. BOP has a significant influence on the nation’s currency value.
A positive current record demonstrates that more capital is entering the country, which is incredible information for the economy. Furthermore, it demonstrates more prominent financial backer interest, which will raise the worth of the British pound.
UK’s Balance of Payments (BOP) or Balance of Trade will determine the value of the GBP. So, it is important to focus on this economic factor if one is interested in tracking the currency value of the British pound.
Whenever a country enters a political crisis, then it is not good for the economy of the country as well. Today there are many examples of this situation which you can see worldwide. For a good economy, it is important to have a stable government. It may not guarantee a good economy, but an unstable government will guarantee you a bad economy.
If we talk about the UK, the Brexit issue has greatly affected it. Due to this, the currency of the country also got hit. It was multi-years low against the other currencies like Euro and USD, and still, it is getting hard to recover.
The pound got 2 major blows in the past in the year 2016. The first was when Britain decided to leave the European Union, and the second was when the Labour party leader who supported Brexit got re-elected.
The UK pound fell to 10-year lows versus the Euro in the first week of August 2019, and a new prime minister who supported a hard Brexit took office. So, one can expect huge volatility in the pound’s value as Britain’s current political scenario is also uncertain.
The British pound has been the strongest currency in the world. But the pound’s value has decreased due to recent events. There will always be some factors that influence the pound’s value. These factors are important for tracking the value of the pound