The Euro Exchange Rate In Relation To The British Pound   by Jeremy Winters

in Finance    (submitted 2012-01-20)

The Euro exchange rate has often been talked about in the money market right from when the currency was first introduced in 2002. When the currency was introduced, there were 12 countries who gave away their own currency and adopted the Euro. Great Britain was one of those countries which did not embrace the Euro as the market for Pounds in the exchange market was quite strong. And although the Euro is pretty much the currency of Europe, the British Pound has mostly enjoyed a higher valuation than Euros.

On January 1, 1999 the Euro emerged as an electronic currency. This meant that the currency could be traded as a commodity in the foreign exchange market. The introduction of the Euro was seen as a stepping stone for Europe which wanted to have a centralized bank for Europe since 1970, so that the economy of Europe could be stabilized. On the trading market, the Euro has always traded between the range of 1.4 and 1.7 British Pounds.

Britain's decision of not adopting the Euro has always created a bit of a stir in the European financial markets. One of the articles in 2008 claimed that the reason behind Britain's hostility towards the Euro was its lack of trust in the currency. Britain did not trust the Euro exchange rate to be as strong as its own currency. So, adopting the Euro was never really in the picture for Britain, even though some of the major European countries like Germany and France had already done so.

Britain even had doubts over the survival of the currency, and with the British Pound always trading above the Euro. Analysts feel that Britain has made the right decision. Though the Euro was introduced as a foreign exchange commodity in 1999, it was introduced as a cash currency in 2002 on New Year's Day. This meant that Euros would then be used in the countries which agreed to accept the Euro as their currency.

In 2002, one British Pound was equivalent to 1.6 Euros. It slipped to one Euro during the summer season. Since then the Pound has always been strong when compared to the Euro exchange rate and it never fell below 1.4 Euros until recently.

At the end of 2007 and the beginning of 2008, the British Pound saw a huge dip in its value. The pound sank below the Euro for the first time in 2008. The British government cited the dropping interest rates and house bubble burst behind the steep dip in the Pound's value. The dip in the value made many believe that Britain should adopt the Euro as its currency, but the country is not convinced as of yet.

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