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The United Kingdom’s historic vote to leave the European Union last year triggered unprecedented volatility in its currency, the British pound. However, Sterling is certainly no stranger to volatility. The currency has come a very long way over its storied 1,200-year history.

Below is a brief rundown of the pound’s history stretching back thousands of years.

The British Pound Begins in Ancient Rome

The pound’s history dates all the way back to continental Europe under the Roman era. Its name comes from the Latin word “poundus,” which means “weight.”

Anglo-Saxon Era; the British Pound Gains Value  

The pound was officially recognized as a unit of currency as early as 775 AD in Anglo-Saxon England. At the time, one pound was equivalent to one-pound weight of silver. This was considered a huge fortune in the eighth century.

By 928, the first king of England adopted the pound as a national currency, where one unit of Sterling fetched you 15 cows.

The Bank of England is Born

The next major development in the pound’s history occurred in 1694 when King William III established the Bank of England (BOE) to fund his ongoing war with France.

By 1717, the U.K. defined the pound’s value in terms of gold rather than silver. The gold standard would become official in the 1800s when Germany adopted it. The U.K. would maintain the gold standard until 1914, when it was suspended to support the country’s war efforts.

The U.K. once again adopted the gold standard in 1925 before dropping it again in 1931.

The British Pound Enters the Modern Period

As the British economy entered another crisis in 1967, the government announced a 14% depreciation of its currency. The pound’s value relative to the dollar would continue to fall through the mid-1970s. By 1979, the government had lifted exchange controls, pushing the pound higher against the U.S. dollar.

Sterling faced a massive drop of 20% in 1992 after the U.K. exited the Exchange Rate Mechanism. The next major drop would occur in 2008 during the onset of the financial crisis.

Finally, the pound faced a historic drop in the summer of 2016 after the U.K. voted to leave the EU. At its weakest, Sterling plunged to 168-year lows against a basket of world peers.[1]

Chris Parker (27 June 2016). “A short history of the British pound.” World Economic Forum.

[1] Mahreen Khan (12 October 2016). “Pound slumps to 168-year low.” Financial Times.

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