What is 'GBP'

GBP is the abbreviation for the British pound sterling, the official currency of the United Kingdom, the British Overseas Territories of South Georgia, the South Sandwich Islands and British Antarctic Territory and the U.K. crown dependencies: the Isle of Man and the Channel Islands. The African country of Zimbabwe also uses the pound. The British pound is pegged to the Falkland Islands pound, Gibraltar pound, Saint Helenian pound, Jersey pound (JEP), Guernsey pound (GGP), Manx pounds, Scotland notes and Northern Ireland notes.

BREAKING DOWN 'GBP'

The British pound has one of the highest trading volumes in the world, trailing only the U.S. dollar, euro and Japanese yen in daily volume. The British pound accounts for about 13 percent of the daily trading volume in foreign exchange markets. In addition to the nickname “quid,” the British pound is sometimes referred to by the name sterling.

The most common currencies that trade in terms of the British Pound are the euro (EUR/GBP) and the U.S. dollar (GBP/USD). GBP/USD is referred to as cable by foreign exchange traders.

History of the British Pound

The British pound became the official currency of the United Kingdom when England and Scotland united to form a single country in 1707. However, the British pound was first created as a form of money in the year 760. The British pound is the oldest currency in the world that is still used as legal tender.

In the late 19th and early 20th centuries, many countries enacted measures to tie the value of their currencies to the price of gold. The gold standard allowed a uniform way to determine value between world currencies. Prior to World War I, the United Kingdom used the gold standard to peg the value of the British pound. At the outbreak of World War I, the country abandoned the gold standard, then reinstated it in 1925 but abandoned it again during the Great Depression.

In 1971, the United Kingdom let the British pound float freely against other currencies. This decision allowed market forces rather than artificial pegs to determine the value of the currency. In 1990, the U.K. considered tying the value of the British pound to the deutsche mark but abandoned this idea shortly thereafter.

Interesting Facts

In addition to the United Kingdom, the British pound has previously served as currency in many of the colonies of the British Empire including Australia, New Zealand and Canada. Prior to 1855, when it began printing British pound notes, the Bank of England wrote all notes by hand. Although the UK was a member of the European Union, they never replaced the British pound with the Euro. The UK is currently in the process of dissolving its membership in the EU after the "Brexit" vote that occurred on June 23, 2016.

The British pound sterling is symbolized by the pound sign (£) and is nicknamed "quid." Because stocks are traded in pence, the British term for pennies, investors may see stock prices listed as pence sterling, GBX or GBp.

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