Offering high liquidity and tight spreads, this pair is affected by economic indicators from the UK, the US and around the world.
GBP/USD, also known by its nickname cable, represents the amount of USD that can be purchased with one British pound. GBP was pegged to the US dollar in 1940 and became part of the Bretton Woods system which governed post-war exchange rates, and with the collapse of the system the pound became free-floating in 1971. Historically, the pound and the US dollar have been the main tool by which many other nations have valued their currencies.
The British pound is influenced by numerous factors, both domestic and international. Domestically, GBP is affected by economic indicators which provide an insight into the health of the UK economy, including interest rates and quantitative easing (both determined by the Bank of England), GDP growth, inflation and labor market data. Furthermore, the British pound can be affected by the prices of some base metals, oil and other commodities.
USD can be influenced by labor market data – in particular non-farm payroll (NFP) results and the level of unemployment – US GDP and inflation data, interest rates and the Fed.