The British Pound Tom Degnan Davin Costa

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

Schedule of Events n n 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 n Trading at 11 year highs against USD n 1992 George Soros – “Man who broke the British Pound. ” n 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

Friday, February 18, 2005 1 GBP in GBP American Dollar 1. 8949 0. 527732 Australian Dollar 2. 40531 0. 415747 Brazilian Real 4. 86232 0. 205663 Canadian Dollar 2. 32959 0. 42926 Chinese Yuan 15. 6831 0. 0637627 Danish Krone 10. 7886 0. 0926903 Euro 1. 44925 0. 69001 Hong Kong Dollar 14. 7791 0. 0676632 Indian Rupee 82. 864 0. 012068 Japanese Yen 200. 272 0. 00499321 Malaysian Ringgit 7. 20062 0. 138877 20. 987 0. 0476486 New Zealand Dollar 2. 61474 0. 382448 Norwegian Kroner 12. 011 0. 0832569 3. 10442 0. 322122 11. 25 0. 0888887 South Korean Won 1940. 38 0. 000515363 Sri Lanka Rupee 188. 069 0. 0053172 Swedish Krona 13. 2018 0. 0757474 Swiss Franc 2. 24015 0. 446398 Taiwan Dollar 59. 6136 0. 0167747 Thai Baht 73. 0863 0. 0136824 Venezuelan Bolivar 3629. 11 0. 000275549 Mexican Peso Singapore Dollar South African Rand

History and Graphs of the British Pound

History of British Currency n n 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. n Exchange rate controls were finally abolished in 1979. n (All of the above can be found at: (http: //www. globalfindata. com/frameset. php 3? location=/gh/index. html ) )

Coin Written As Spoken As Circulation Dates How expressed in £ s d farthing 1/4 d half penny 1/2 d penny 1 d silver threepence 3 d groat 4 d sixpence 6 d a tanner 1550 -1967 shilling 1/- a bob 1548 -1967 1 s 0 d florin 2/- 1849 -1967 2 s 0 d half-a-crown 2/6 half a dollar 1526 -1967 2 s 6 d crown 5/- a dollar 1544 -current* 5 s 0 d nobel 6 s 8 d 1464 -1642 6 s 8 d pound 20/- ? -current £ 1 0 s 0 d sovereign 20/- ? -? ** £ 1 half-sovereign 10/- ? -? ** 10 s guinea 21/- 1663 -1813*** £ 1 1 s 0 d 1279 -1956 hape-nee 886 -1967 ? -1967 thrippence 1551 -1944 1279 -1888 a quid

British Currency after 1971 n n n 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)

Copper 1 p One pence 2 p Two pence 5 p Five pence 10 p Ten pence Small 7 sided Coin 20 p Twenty pence Large 7 sided Coin 50 p Fifty pence £ 1 One pound or quid £ 2 Two pound or quids Green £ 5 Five pounds or "a fiver" Orange and grey £ 10 Ten pounds or "a tenner" Blue Silver Smallest Coin £ 20 Twenty pounds Smallest Silver Coin Yellow Notes There are notes of higher denominations, but these are not so common and you probably won't see them in general circulation. Note: Chart and above info obtained from (http: //gouk. about. com/cs/photoswebcams/l/bldecandmec. htm)

British Pounds to 1 JPY 120 days latest (Feb 18) - 0. 00499321 lowest (Dec 14) - 0. 00492261 highest (Nov 19) - 0. 0052299

British Pounds to 1 CHF 120 days latest (Feb 18) - 0. 446398 lowest (Aug 27) - 0. 434922 highest (Nov 19) - 0. 464078

British Pounds to 1 CAD 120 days latest (Feb 18) - 0. 42926 lowest (Dec 20) - 0. 417414 highest (Nov 12) - 0. 45224

British Pounds to 1 USD 120 days latest (Feb 18) - 0. 527732 lowest (Dec 20) – 0. 513294 highest (Sep 7) – 0. 56392

120 days • latest (Feb 18) - 0. 69001 • lowest (Aug 27) - 0. 671001 • highest (Dec 30) - 0. 708792 British Pounds to 1 EUR

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

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

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

Great Britain Pound Long-Term Forecast

UK Trade £ 3. 0 billion deficit in Dec 2004 http: //www. statistics. gov. uk/CCI/nugget. asp? ID=199

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

The Facts… n n n 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. 1 billion. 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.

The Bottom Line… n n n 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

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