Business Environment Profiles - United States
Published: 16 June 2025
UK pound sterling exchange rate
1 £
-0.5 %
The St. Louis Federal Reserve measures the US dollar to British pound sterling exchange rate as the average value on the first day of each month. Annual figures referenced in this report are the equally weighted averages of these monthly figures.
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Prior to the global financial crisis, the pound had steadily appreciated in value in relation to the dollar. This movement was the result of the higher prevailing interest rates in the UK, which encouraged investors to invest their money there, driving up the demand for pounds. In addition, pounds were increasingly held around the world as a reserve currency, while the dollar's use as a reserve currency fell slightly. However, the financial crisis caused the demand for pounds to plummet.
The UK's economy heavily relies upon its banking sector, and when the collapse of Lehman Brothers Holdings Inc. threw global markets into turmoil in late 2008, the UK was hit especially hard. Investors fled the UK for the world's largest economy, the United States. As a result, the value of the pound in relation to the dollar fell rapidly. The value of one dollar in terms of the pound rose significantly between November 2007 and November 2008. Since 2012, the dollar has risen rapidly against the pound. Political uncertainty leading up to and the eventual Brexit vote led to significant flight to the US dollar, which caused the pound's value to fall significantly. In 2018, the pound regained some value against the dollar as Bank of England increased the interest rate from 0.5% to 0.75%, which has encouraged saving and investment in the United Kingdom and pushed up demand for pounds.
The pound experienced selling pressure in 2020 as the COVID-19 (coronavirus) pandemic negatively affected global financial markets, leading investors to transfer funds to safe haven currencies such as the US dollar. Since the initial outbreak, the pound's value to the US dollar has improved thanks to vaccination mandates and gradual economic reopening. The UK's overall vaccine distribution has been fast and effective, leading global investors to anticipate that the UK economy will recover more rapidly than other developed economies. While a Brexit agreement was reached in 2020, unintended negative consequences of the agreement are still expected for the UK economy.
The pound appreciated in 2021 amid the UK's recovery efforts being healthy relative to other developed and emerging markets. During 2022, The Bank of England continued to raise interest rates as it fought to curb the highest inflation in 40 years while energy prices soared globally. Additionally, the Russian-Ukraine war has decreased investor confidence in the pound as global oil and gas price increases further increase UK inflation. The conflict has increased the scale of energy price increases, contributing to some weakness in the pound. In 2025, the US dollar is expected to be weaker over the pound.
The British pound's expected appreciation against the US dollar over the next five years is roote...
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