The Great British pound, also known as the pound sterling, is the fourth most traded currency in the forex market.2 Although the U.K. was an official member of the European Union, the country never adopted the euro as its official currency for a variety of reasons, namely historic pride in the pound and maintaining control of domestic interest rates.13 As a result, the pound is sometimes viewed as pure-play in the United Kingdom.
Forex traders will often estimate the value of the British pound based on the overall strength of the British economy and the political stability of its government. Due to its high value relative to its peers, the pound is also an important currency benchmark for many nations and represents a very liquid component in the forex market. The British pound also acts as a large reserve currency due to its historically high relative value compared to other global currencies.8
Being located in close proximity to the world’s largest consumer base—the United States—the Canadian economy and the Canadian dollar are highly correlated to the U.S. economy and movements in the U.S. dollar as well.