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The British Pound ( £)

The British Pound ( £). Tom Degnan Davin Costa Tom Lacny Brian Billick Manuel Davila. Schedule of Events. Current Status of the Pound Historical Graphs of the Pound Short Term Analysis and Forecast Long Term Analysis and Forecast. Current Status of the Pound.

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The British Pound ( £)

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  1. The British Pound (£) Tom Degnan Davin Costa Tom Lacny Brian Billick Manuel Davila

  2. Schedule of Events • Current Status of the Pound • Historical Graphs of the Pound • Short Term Analysis and Forecast • Long Term Analysis and Forecast

  3. Current Status of the Pound • Trading at 11 year highs against USD • 1992 George Soros – “Man who broke the British Pound.” • What is fueling the rally of the pound? 1. Strong UK fundamentals – Hiking bias 2. US Dollar weakens 3. Technical Outlook 4. Short Term Fundamentals Favor Gains

  4. History and Graphs of the British Pound

  5. History of British Currency • England was unified under William the Conqueror in 1066 • The Pound (GBP) was introduced into England by the Normans even before William I conquered England. The principle subdivisions of the 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 Pounds), Crown (5 Shillings), Florin (2 Shillings) and Farthing (1/4 Pence). • The Bank of England was created on July 27, 1694 • The United Kingdom left the Gold Standard several times, only to keep reinstating it until it was finally abandoned on June 23, 1972. Throughout this time period, the rate at which the Bank of England would buy gold remained constant at 3 pounds, 17 shillings, 10.5 pence. • Exchange rate controls were finally abolished in 1979. • (All of the above can be found at:(http://www.globalfindata.com/frameset.php3?location=/gh/index.html) )

  6. British Currency after 1971 • On February 15, 1971, Britain adopts the decimal system • The change essentially made one British Pound equal to 100 pence. • The 5 pence piece replaces the shilling, and the 10 pence piece was introduced to replace the florin • Both the half-penny and half-crown were removed from circulation • Banks were closed for 4 days in order to fully embrace the new currency rates • Note: Previous chart obtained from (http://gouk.about.com/cs/literature/l/blbritcurr.htm)

  7. Note: Chart and above info obtained from (http://gouk.about.com/cs/photoswebcams/l/bldecandmec.htm)

  8. British Pounds to 1 JPY • 120 days • latest (Feb 18) - 0.00499321 • lowest (Dec 14) - 0.00492261 • highest (Nov 19) - 0.0052299

  9. British Pounds to 1 CHF • 120 days • latest (Feb 18) - 0.446398 • lowest (Aug 27) - 0.434922 • highest (Nov 19) - 0.464078

  10. British Pounds to 1 CAD • 120 days • latest (Feb 18) - 0.42926 • lowest (Dec 20) - 0.417414 • highest (Nov 12) - 0.45224

  11. British Pounds to 1 USD • 120 days • latest (Feb 18) - 0.527732 • lowest (Dec 20) – 0.513294 • highest (Sep 7) – 0.56392

  12. British Pounds to 1 EUR • 120 days • latest (Feb 18) - 0.69001 • lowest (Aug 27) - 0.671001 • highest (Dec 30) - 0.708792

  13. GBP Short Term Forecast Current Economic Conditions The UK has experienced 44 consecutive quarters of expansion Bank of England enacted a highly restrictive monetary policy raising rates on 5 consecutive occasions last year UK faces rapidly growing trade deficit which could force a downward adjustment in the currency . The latest report showed a gap of –5300M GBP vs. expectations of only –4750M

  14. GBP Short Term Forecast 2005 Implications Short GBP futures not pricing at a rate hike over the next year Bank of England has the option of materially easing monetary policy should growth in UK rapidly deteriorate. Large interest rate differential between GBP and USD has raised speculative positions from carry traders. Increases volatility and speculation effect on currency value. Political fortune of Tony Blair and the Labor party is at stake.

  15. GBP Short Term Forecast Prediction The British Pound will encounter a short term downtrend

  16. Great Britain Pound Long-Term Forecast

  17. UK Trade £3.0 billion deficit in Dec 2004 http://www.statistics.gov.uk/CCI/nugget.asp?ID=199

  18. The Numbers… http://www.statistics.gov.uk/instantfigures.asp

  19. The Facts… • 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 enlarged EU worsened to £2.4 billion • The value of exports to non-EU increased across a wide range of manufactured goods. As a result the deficit with non-EU countries improved to £2.1billion. • The European Commission has announced its support for 10 more countries to join the EU from the beginning of 2004.Taken together these countries accounted for 2% of UK exports and 2% of UK imports in 2001.

  20. The Bottom Line… • Increasing Trade Deficit with the EU • Increasing number of countries that trade with the UK are joining the EU • Could lead to an increase in trade deficit in the future - which would mean excess supply and devaluation

  21. CITY GUIDE TO A UK EURO CHANGEOVER 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

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