The British pound sterling (GBP) is one of the most widely recognised and traded currencies in the world.
As the official currency of the United Kingdom and its overseas territories (GBP is also the official currency and is used in Jersey, Guernsey, Gibraltar, the Isle of Man, South Georgia and the South Sandwich Islands, the British Antarctic Territory, and Tristan da Cunh), GBP holds a significant place in global finance, known for its stability, strong market presence, and deep historical roots.
Consistently ranking among the top five most traded currencies on the forex market, the pound is considered a "major" currency, sought after by investors and traders for its liquidity and volatility.
With a rich heritage, modern security features, and a central role in international trade, the British pound remains a cornerstone of the global currency system.
Historical context of pound sterling
The British pound sterling is the oldest currency still in use today, with a history spanning over 1,200 years.
Its origins trace back to Anglo-Saxon England around the 8th century, when silver coins known as sterlings were first introduced. The term “pound” originally referred to a pound weight of silver, equivalent to 240 silver pennies. This system laid the foundation for the pre-decimal structure of British currency, which remained in place for centuries.
The modern financial role of the pound began to crystallise with the founding of the Bank of England in 1694, which was established to fund the government’s war efforts and soon took on the responsibility of issuing paper money. By the 18th and 19th centuries, Britain had become a global empire, and the pound sterling became the world’s dominant reserve currency, underpinned by the gold standard.
The gold standard was a monetary system in which a country’s currency was directly tied to a specific amount of gold. Under this system, governments agreed to convert paper money into a fixed quantity of gold upon request, and the value of a nation’s currency was determined by the amount of gold it held in reserve. However, the pound’s global dominance began to wane in the 20th century due to two world wars, the collapse of the British Empire, and the rise of USD. The UK formally abandoned the gold standard in 1931, moving to a fiat currency system.
One of the most significant reforms came in 1971 with the decimalisation of sterling (when the UK converted to a decimal currency), replacing the old system of pounds, shillings, and pence with the simpler structure of 100 pence to a pound.
Despite economic changes, political shifts, and global financial transformations, pound sterling (GBP) has remained a pillar of stability and continuity. Today, it continues to serve as the official currency of the United Kingdom and several of its territories, reflecting both its historical legacy and ongoing relevance in the modern global economy.
Currency symbol
The currency symbol for the British pound sterling is £, a stylised form of the letter “L”, derived from the Latin word libra, meaning pound in weight.
The symbol is typically placed before the amount, for example £10.
This reflects the historical origins of the pound as a unit of weight and money, when one pound sterling was originally equivalent to a pound of silver. It is standard in accounting, banking, e-commerce, and international finance when referencing prices, salaries, exchange rates, and budgets in GBP.
Although the pound sign (£) is used informally and in daily life, GBP (the ISO 4217 currency code) is used for formal and international contexts, such as trading in foreign exchange markets, currency conversions, currency markets, and cross-border transactions. Together, these identifiers make the pound both functionally clear and symbolically powerful in the world of money.
ISO code
The ISO currency code for the British pound is GBP, which stands for "Great British Pound."
This code is used in international banking, currency markets, and financial systems to avoid confusion with other currencies. For example, when trading or exchanging currencies, the code "GBP" ensures that the correct currency is being referenced, regardless of language or region during the conversion of sterling.
GBP is a fiat currency and considered a major currency. It's consistently one of the top five most traded currencies in the world, along with USD, EUR, JPY, and CHF. It is also one of the few currencies in the IMF's Special Drawing Rights (SDR) basket, which is used to supplement official reserves of member countries.
Central bank
The Bank of England (BoE) is the official central bank responsible for managing and issuing the GBP.
Established in 1694, it is one of the oldest central banks in continuous operation. The Bank of England operates independently from the UK government but works closely with it to ensure the country’s economic stability.
Its core responsibilities include setting interest rates, monetary policy, controlling inflation, managing the UK’s gold reserves, and the issuance of banknotes (the BoE now only issues polymer banknotes).
The Bank of England’s Monetary Policy Committee (MPC) meets regularly to set the UK’s base interest rate, a key tool used to maintain monetary policy and inflation around the government’s 2% target.
In addition to its regulatory role, the Bank is also tasked with ensuring that all GBP polymer banknotes are secure, durable, and trusted by the public.
Read more about the Bank of England and Monetary Policy Committee's interest rate decisions here:
Denominations
GBP is available in both coins and paper money (polymer banknotes), which are issued by the Bank of England in England and by regional Scottish banks and Northern Irish banks.
Common banknote denominations include £5, £10, £20, and £50, with each note featuring notable historical British figures such as Winston Churchill, Jane Austen, and Alan Turing. The newer polymer banknotes offer advanced security features such as see-through windows, holograms, and raised print, making them highly resistant to counterfeiting.
The denominations of coins in circulation include: 1p, 2p, 5p, 10p, 20p, 50p, £1, and £2.
Each coin features distinct designs and emblems representing the UK’s heritage. The £1 coin in circulation (pound coin), reintroduced in 2017, is touted as “the most secure coin in the world” due to its 12-sided shape and anti-counterfeiting technology.
Currency subunit
One pound sterling is divided into 100 pence, abbreviated as p (e.g., £1 = 100p).
The term “pence” is the plural of “penny,” and it is a direct result of the decimalisation of sterling in 1971, which replaced the old system of 240 pence per pound (divided into 12 pence per shilling and 20 shillings per pound). However, in everyday use, people refer to subunits simply as “pee” (e.g., “It costs 99 pee”).
The decimalisation of sterling
The decimalisation of sterling marked one of the most significant reforms in the history of the British pound.
On 15 February 1971, a day now known as Decimal Day, the United Kingdom and Ireland officially transitioned from a centuries-old currency system based on pounds, shillings, and pence to a simplified, decimal-based system.
Under the new decimal currency system, one pound sterling was divided into 100 new pence, replacing the former structure of 240 pence per pound, which had been split into 12 pence per shilling and 20 shillings per pound.
The old system, while historically rich, was complex and difficult to use, particularly for arithmetic in everyday transactions. The decimalisation of sterling brought the UK in line with the majority of the world’s currencies, making calculations easier for consumers, retailers, banks, and international traders. The new decimal currency was especially beneficial for accounting, education, and pricing transparency.
The change to the decimal currency was carefully planned and introduced gradually. Dual pricing (showing prices in both old and new units) was used in the run-up to Decimal Day to help the public adjust. The government also issued educational materials, ran advertising campaigns, and distributed conversion tables to ensure a smooth transition. New decimal coinage such as the 5p, 10p, and 50p had already been introduced in advance, and they matched the size and value of their pre-decimal counterparts to reduce confusion.
The decimalisation of sterling and overall move to decimal currency was widely successful, and the public adapted quickly. Over time, the old coinage was withdrawn from circulation. Today, the decimalisation of sterling is seen as a key milestone in the modernisation of the UK’s monetary system, and the current GBP structure (where 100 pence equal £1) remains in use.
This shift not only made the currency more efficient but also better suited to the needs of a globalised and digitally driven economy.
Official name and common nicknames
The official name of GBP is "pound sterling", though it is widely known as the British pound.
The name distinguishes it from other currencies also called the “pound,” such as the Egyptian or Lebanese pound. The term “sterling” historically indicated that the currency was made of sterling silver.
In informal settings, "quid" is the most common slang for GBP. It's used much like "buck" is for the US dollar (e.g., “That’ll be 20 quid”).
Other colloquial terms include "nicker" (rare slang for one pound), and for specific denominations, "fiver" (£5 note), "tenner" (£10 note), and "score" (£20, although more traditional). These nicknames are widely used across the UK and are an integral part of everyday language and British pop culture.
Before decimalisation of sterling in 1971, the subunits of pound sterling had a variety of common names, nicknames, and slang terms.
The penny, the basic subunit (abbreviated as "d" from the Latin denarius), was often called a “copper” due to its metal composition. A halfpenny was colloquially known as a “ha’penny” (pronounced hay-penny), and the farthing, worth a quarter of a penny, was used for very small purchases and phased out in 1960. The threepence coin was commonly called a “thruppence” or “thrup’ny bit”, especially the distinctive twelve-sided version introduced in the 1930s. A sixpence coin was affectionately called a “tanner”, while the shilling was known as a “bob”—a widely used and recognised slang term. A two-shilling coin, or florin, was occasionally referred to as “two bob”.
Common GBP forex trading pairs
GBP's long-standing role in global finance, historical significance, and association with the UK economy make it a popular choice among traders, investors, and institutions alike.
The GBP is highly liquid and often used as a benchmark currency, particularly in Europe and Commonwealth-related financial activity.
Major GBP forex pairs
These are the most liquid and widely traded currency pairs involving the British pound:
- GBP/USD – British pound / US dollar (commonly known as “Cable”)
- GBP/EUR – British pound / euro (EUR)
- GBP/JPY – British pound / Japanese yen
- GBP/CHF – British pound / Swiss franc
- GBP/AUD – British pound / Australian dollar
- GBP/CAD – British pound / Canadian dollar
- GBP/NZD – British pound / New Zealand dollar
These major GBP pairs are favoured for their tight bid/ask spreads, high daily volume, and strong correlation to UK and global economic indicators.
GBP/USD, in particular, is one of the most analysed and actively traded pairs in the forex market.
GBP commodity forex pairs
The pound is also frequently traded against commodity currencies and emerging market currencies, offering additional volatility and macroeconomic exposure:
- GBP/NOK – British pound / Norwegian krone
- GBP/SEK – British pound / Swedish krona
- GBP/ZAR – British pound / South African rand
- GBP/TRY – British pound / Turkish lira
- GBP/PLN – British pound / Polish złoty
- GBP/SGD – British pound / Singapore dollar
These pairs are often influenced by commodity prices, regional economic performance, and central bank decisions in both the UK and the respective countries.
They present opportunities for diversification but may carry wider spreads and higher volatility than major GBP pairs.
