What is GBP (British Pound) in Forex?

Understanding GBP (British Pound) in Forex

GBP (British Pound), also known as Pound Sterling, is the official currency of the United Kingdom and one of the oldest and most traded currencies in the forex market. As the fourth most-traded currency globally, GBP is known for its volatility, often experiencing larger daily ranges than other major currencies. This volatility creates opportunity but also demands careful risk management. GBP pairs are influenced by Bank of England policy, UK economic data, and geopolitical factors including Brexit aftermath.

Major GBP Pairs

GBP/USD, nicknamed "Cable" (referencing the transatlantic telegraph cable used for price transmission), is the third most-traded currency pair. EUR/GBP measures the pound against the euro, heavily influenced by relative UK-EU economic performance. GBP/JPY ("The Beast" or "Guppy") is notorious for extreme volatility and large pip ranges, attracting aggressive traders but requiring wider stops. GBP/AUD and GBP/NZD offer exposure to commodity currency dynamics against the pound.

What Drives GBP

Bank of England monetary policy is the primary driver, particularly interest rate decisions and quantitative easing programs. UK economic data including GDP, inflation (CPI), employment, and retail sales significantly impact the pound. Political stability, government fiscal policy, and Brexit-related developments continue influencing sentiment. GBP often exhibits heightened sensitivity to risk sentiment, weakening during risk-off periods as investors favor safe havens like USD and JPY.