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| Why is the GBP so strong against the USD? Posted by PenguinNinja I know, I know...the Chinese own us, and all that noise.  on 5/9 at 11:05 pmBut fundamentally, the GBP has been MUCH stronger than the USD since at least 2005 (the first time I checked). Why is it that the USD is so worthless relative to the GBP? What are the British doing to keep their currency strong that we're not? FTR (and in case it isn't obvious), I don't know shite about this stuff, so go easy on me. Reply • Back to Top |
| I have an answer, but I will wait to see what BennyandtheInkjets says first. Reply • Back to Top |
quote:I'm not sure it is. What led to that impression? Reply • Back to Top |
quote:Define 'worthless.' Reply • Back to Top |
| The GBP has lost 18% against the USD in the last 5 years- I'm not sure I call that strong... Are you talking from a historical point of view? Reply • Back to Top |
| I have an answer, but I will wait to see what kfizz says first. Reply • Back to Top |
| The suspense is killing me. Reply • Back to Top |
 Srsly tho. To other posters comments, I was thinking of it in more of a historical context, not specifically the last 2 years or so. Reply • Back to Top |
| Alright, I'll blink. In a very basic context ignroing everything at the margin and cross currency correlations: GBP/USD is one of the most liquid currency contracts you can get. Its controlled by money supply, economic strength, and since finance is 10% of UK GDP and most most financial contracts for the longest time were in GBP or USD, interest rates are a huge factor. Averages since 1992 10-Year Treasury - 4.86 10-Year Guilt - 5.30 Fed Rate - 3.20 BOE Rate - 4.54 Reply • Back to Top |
| This was going to be my OP verbatim: "outside of economic factors, basic supply/demand, driven largely by London being the banking capital of the world." Reply • Back to Top |
| Can you clarify the reasoning for the correlation between the higher interest rate of England's "treasuries" and the strength of the pound? Maybe I am being stupid, but if England was the banking capital of the world and its currency had a higher demand, wouldn't the value of the currency go up and the interest rates go down? This post was edited on 5/10 at 10:13 am Reply • Back to Top |
| Assuming you're operating under the all-time favorite line of all college econ professor "ceteris paribus," yes. IRL there's central banks and they don't much care about that. Reply • Back to Top |
quote: This. For example, right now a lot of people around the world are nervous and so they buy US Treasuries, instead of gilts. Reply • Back to Top |
quote: Which I fail to understand since you literally loose i think 1% on a 10yrT- bond after inflation and gains tax I would rather go park my money in SGD or HKD and wait for the Chinese to free float the Yuan and watch it and the HKD take off. Reply • Back to Top |
quote: Are they actually going to willingly do this? Reply • Back to Top |
quote: Even though the underlying currency is supposedly stronger? This post was edited on 5/10 at 11:33 am Reply • Back to Top |
| Not any time soon IMO. Reply • Back to Top |
quote: That's pretty debatable. Reply • Back to Top |
quote: Strength of a currency isn't the value but rather the recent and expected change. If I was forced to make a trade at this point in time I'd be short the pound. Reply • Back to Top |
quote: I'd rather be short the EUR. If people seek safe haven in Europe I think the GPB could rise against the EUR. In either case if I was in a European currency it'd be the Swiss Franc or Norwegian Krone. Oh and long on Yen short. That country has like a 200% debt/GDP This post was edited on 5/10 at 12:52 pm Reply • Back to Top • Refresh |
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