• The well known symbol for the British poundbritish pound image by Photosani from Fotolia.com
  
  The British pound as a unit of currency can be traced from prior to the Middle Ages to the Anglo-Saxon days. It has been a mainstay of the world economic scene ever since and today is the third most circulated and traded currency in the world, trailing only the U.S. dollar and the euro. With such a lengthy history of use, it is interesting to note how the pound has trended historically in relation to other major world currencies, primarily the dollar.
  
  

Pre-Modern

• In 1816, the British pound as a paper currency was pegged to the value of gold and, as such, floated in relative value to this precious metal. At that time there was no United States dollar or euro to compete with for status as major world currency. International exchange of currency was conducted on such a small scale as to be considered insignificant. During the late 19th and early 20th centuries a host of other countries adopted the gold standard. This standardization of currency made it easier to gauge how much one country's money was worth relative to another, heralding the arrival of the idea of foreign exchange (Forex). During the 1940s the pound was pinned to the dollar at an exchange rate of $4.03 for a pound note. In 1949 it was devalued by the government to $2.80. Beginning in 1971, the pound became a free-floating currency and traders could watch trends develop in relation to other world currencies.
  
  

1970s

• The pound began the decade by slightly appreciating against the dollar, a condition which couldn't last in the face of the British government's incredible rate of public spending, dropping the English currency below $2.40. The British public thought their currency was taking a beating but they hadn't seen the worst yet. In 1979, a conservative government took control with promises of fiscal responsibility that would revive their money.
  
  

1980s

• England was plunged into a deep recession during the decade of the 1980s, with the pound hitting a low water mark in value against the dollar at $1.03 in March 1985. The rest of the decade saw a slow return to respectability as the Thatcher government's approach began to revive the nation's battered currency, By the end of the decade, the pound stood at $1.70 against the dollar.
  
  

1990s

• The decade of the 1990s saw the creation of the European Union (EU) as an economic entity, including the implementation of a new currency dubbed the euro. Perhaps contrary to popular belief, England is an official member of the EU but has yet to adopt the euro as its currency. There is a strong sentiment in England to maintain the pound. To date, no politician has seen fit to try to force the change. In 1997, control of interest rates were turned over to the Bank of England. This move was taken to try to keep inflation as close to 2% as possible.
  
  

Final Thoughts

• The pound and euro fluctuate against each other, though their movement against the dollar seems to be a correlation. When British interest rates shot up in 2007, the pound shortly thereafter reached a 15-year high against the dollar at over $2. Since then, the pound has been steadily declining against both the dollar and euro.