Currency is the medium of exchange for goods and services.

In short, it is money in
the form of paper or coins, usually issued by a government and generally accepted at its face
value as a method of payment. Currency is the premium medium of exchange in the modern
world, having long ago replaced bartering as a means of trading goods and services.

Currency is a system of money in common use especially for people in a nation.

Under this definition, U.S. dollars, Euros, Japanese yens and Pounds Sterling are examples of
currencies. These various currencies are recognized as stores of value and traded between
nations in foreign exchange markets which determine the relative values of the different
currencies. Currencies in this sense are defined by government and each type has limited
boundaries of acceptance.

The Pound Sterling is an official currency for United Kingdom, Jersey, Guernsey, the
Isle of Man, Gibraltar, South Georgia and the South Sandwich Islands. Pound Sterling is
Issued and controlled by The Bank of England, the ISO currency code for Pound Sterling is
GBP.

The currency sign for pound is £, which is written in a single cross bar. Historically, a
simple L was used in newspapers, books and letters. The symbol derives from medieval latin
documents, the black letter L was the abbreviation for Libra, the basic Roman unit of weight,
taken (incorrectly) as equivalent to a latter day pound in weight.

The pound sterling was commodity money or bank notes that are backed by silver or
gold before, but it is currently fiat money, backed only by the economy in the areas where it
is accepted. The pound sterling is the world’s oldest currency that are still being used and
which has been continuously used since its inception.
 Pound sterling currency for the year 2019 from January 2019 to September 2019.

This line chart shows the currency of pound sterling for the year 2019. For this study, I will
focus on the fluctuation of pound sterling currency from January 2019 to September 2019.

In January 2019, GBP currency started at GBP/USD 1.32615 from 1.31108 in

December 2018. This shows that GBP/USD had increased 156.8000 or 1.18% to 1.32615 on
January 2019 from 1.31108 in the previous trading session. This means that USD had
depreciated 1.09% because in January 2019, 1.32615 of USD is needed to be traded with
GBP 1 from only 1.31108 of USD needed to be traded with GBP 1 in the previous trading
session.

This increase of GBP currency may be due to the United Kingdom December trade
gap larger than expected. The UK trade deficit widened to GBP 3.83 billion in January 2019
from an upwardly revised GBP 3.45 billion in the previous month and compared with market
expectations of a GBP 3.5 billion gap. Exports rose 2.3 percent month-over-month to GBP
54.66 billion and imports increased at a faster 2.8 percent to GBP 58.49 billion. This resulting
to current account deficit for this country as its current account deficit had widened since
December 2018. It shows that Indonesia’s expenses was larger than its income in the current
year. Increases in the current account deficit would lead to the fall in exchange rate. The flow
of currency out of the country leads to a weakness for the currency. If there is insufficient
capital flows to finance the deficit, the exchange rate will fall to reflect the imbalance of
foreign flow of funds. Therefore, this event caused the investors to worry about Rupiah
currency and started to sell IDR in order to avoid risk from the fall of Rupiah currency. Thus,
USDIDR had increased 155.0000 or 1.09% to 14420.0000 on January 2019 from 14265.0000
in the previous trading session.

In February 2019, Pound sterling currency started at GBPUSD 1.3263 from 1.3102 in
January 2019. This shows that USDIDR had increased or 1.23% to 1.3263 on February 2019
from 1.3102 in the previous trading session. This means that GBP had appreciated 1.23%
because in February 2019, 1.3263 of USD is needed to be traded with GBP 1 from 1.3102 of
USD needed to be traded with GBP 1 in the previous trading session.

This rise of Indonesia currency may be due to Indonesia trade balance swings to
surplus in February 2019. The UK trade deficit decreased to GBP 4.86 billion in February of
2019 from an upwardly revised GBP 5.35 billion in the prior month. Exports rose 0.1 percent
month-over-month to GBP 54.79 billion while imports fell 0.7 percent to GBP 59.65 billion.
Therefore, in many cases a trade surplus helps to strengthen a country’s currency relative to
other countries. Based on this study, United Kingdom’s trade surplus helped its currency
relative to USD which increased GBP exchange rates.

Next, in March 2019, GBP currency started at GBPUSD 1.3033 from 1.3263 in
February 2019. This shows that GBP had decreased -1.73% to 1.3033 on March 2019 from
1.3263 in the previous trading session. This means that GBP had depreciated -1.73% because
in March 2019, 1.3033 of USD is needed to be traded with GBP 1 from 1.3263 of USD
needed to be traded with GBP 1 in the previous trading session.

In April 2019, pound sterling currency started at GBPUSD 1.3034 from 1.3033 in
March 2019. This shows that GBPUSD had increased slightly 0.01 to 1.3034 on April 2019
from 1.3033 in the previous trading session. This means that GBP had appreciated 0.01%
because in April 2019, 1.3034 of USD is needed to be traded with GBP 1 from 1.3033 of
USD needed to be traded with GBP 1 in the previous trading session.
 This rise of pound sterling currency may be due to United Kingdom economy
contracts in the end of the month of March 2019. Britain's gross domestic product expanded
1.3 percent year-on-year in the second quarter of 2019, slightly above a preliminary estimate
of 1.2 percent and compared to a revised 2.1 percent growth in the previous period . It has not
been weaker since the first three months of 2018. On the expenditure side, household
expenditure rose 1.1 percent in the second quarter (vs 1.3 percent in Q1); and government
spending advanced 4.0 percent (vs 2.8 percent in Q1). Meanwhile, fixed investment growth
slowed to 0.3 percent (vs 0.8 percent in Q1) amid a further decline in business investment (-
1.4 percent vs -1.6 percent).
Exports fell 1.4 percent, after a 2.8 percent advance in Q1; while imports dropped 0.4
percent, compared to a 14.9 percent jump in the previous period. As a result, the trade deficit
widened to £10.453 billion from £−9.067 billion in Q2 2018. Government consumption is
estimated to hahave increased by 0.8 percent, revised down from the first estimate of 1.4
percent and following an advance of 1.
Have increased by 0.8%, revised down from the first estimate of 1.4 percent and following an
advance of 1.3 percent in the previous quarter. When the government consumption rises, the
the aggregate output will increase. Therefore, more incentives for the supplier and demand
for pound sterling increase. Thus, exchange rate of GBPUSD rose 0.01% to 1.3034 on April
2019 from 1.3033 in March 2019.

In May 2019, pound sterling currency started at GBPUSD 1.2632 from 1.3034 in
April 2019. This shows that GBPUSD had decreased -3.08% to 1.2632 on May 2019 from
1.3034 in the previous trading session. This means that GBP had depreciated -3.08% because
in May 2019, 1.2632 of USD is needed to be traded with GBP 1 from 1.3034 of USD needed
to be traded with GBP 1 in the previous trading session.

The fall of pound sterling currency may be due to the United Kingdom’s trade deficit
narrowed to GBP 2.32 billion in May 2019 from a revised GBP 3.72 billion in the previous
month. That was the smallest trade deficit since last September. Exports of goods and
services from the UK surged 2.4 percent from a month earlier to GBP 54.38 billion in May
2019, recovering from a 4.6 percent drop in April. Imports to the UK fell 0.2 percent from a
month earlier to GBP 56.71 billion, the second consecutive month of decline, as goods
purchases dropped 0.6 percent. This represents an outflow of domestic currency to foreign
markets. This means that high imports in United Kingdom had reduced foreign currency
deposits resulting in weakening the GBP and increasing inflation. Thus, exchange rate of
GBP fell -3.08% to 1.2632 in May 2019 from 1.3034 in April 2019.

In June 2019, pound sterling currency started at GBPUSD 1.2695 from 1.2632 in May
2019. This shows that GBPUSD had increased 0.50% to 1.2695 in June 2019 from 1.2632 in
the previous trading session. This means that USD had depreciated 0.50% because in June
2019, 1.2695 of USD is needed to be traded with GBP 1 from 1.2632 of USD needed to be
traded with GBP 1 in the previous trading session.

The rise of pound sterling currency may be due to the United Kingdom trade surplus.
The UK posted a trade surplus of GBP 1.79 billion in June 2019 compared to a downwardly
revised GBP 2.0 billion deficit in the prior month. This was the first trade surplus since
February 2011. Exports of goods and services from the UK grew 4.5 percent from a month
earlier to GBP 55.41 billion in June 2019, the most since October 2016. This resulting to the
appreciation of GBP due to the fall of value of exports and increasing in outflow of domestic
currency to foreign markets for Indonesia in the current month. Thus, GBP had appreciated
0.50% because in June 2019, 1.2695 of USD is needed to be traded with GBP 1 from 1.2632
of USD needed to be traded with GBP 1 in the previous trading session.

In July 2019, pound sterling currency started at GBPUSD 1.2159 from 1.2695 in
June 2019. This shows that GBPUSD had decreased -4.22% to 1.2159 in July 2019 from
1.2695 in the previous trading session. This means that GBP had depreciated -4.22% because
in July 2019, 1.2159 of USD is needed to be traded with GBP 1 from 1.2695 of USD needed
to be traded with GBP 1 in the previous trading session.

The fall in pound sterling currency may be due to United Kingdom economic growth
increase by only 1% since the end of June 2019. The UK trade deficit narrowed sharply to
£4.311 billion from a record £10.453 in the previous period. Exports jumped 5.2 percent (vs
-6.6 percent in Q2), reflecting increases in machinery and transport equipment and chemicals,
alongside an advance in “other business services”. Meanwhile, imports were 0.8 percent
higher (vs-13.0percentinQ2). In contrast, gross capital formation (GCF) subtracted from GDP
growth, broadly reflecting a decrease in aligned change in inventories, which decreased for
the second consecutive quarter as businesses appear to be continuing to run down stock
levels. This follows the large increase in Q1, reflecting to a large extent the pronounced
building up of stocks in the run-up to the UK’s original exit date from the EU at the end of
March. The UK trade deficit rose slightly to GBP 0.22 billion in July 2019 from a revised
GBP 0.13 billion shortfall in the previous month. Imports rose 2.7 percent while exports
advanced at a slower 2.5 percent. Thus, GBP had depreciated -4.22% from GBPUSD 1.2695
in June 2019 to 1.2159 in July 2019.

Next, in August 2019, pound sterling currency started at GBPUSD 1.2158 from
1.2159 in July 2019. This shows that GBPUSD had decreased -0.01% to 1.2158 in August
2019 from 1.2159 in the previous trading session. This means that GBP had depreciated
-0.01% because in August 2019, 1.2158 of USD is needed to be traded with GBP 1 from
1.2159 of IDR needed to be traded with GBP 1 in the previous trading session.

The fall in pound sterling currency may be due to United Kingdom GDP annual
growth slows down at the end of July 2019. The UK economy grew by 0.2 percent on quarter
in the three months to December 2018, easing from a 0.6 percent expansion in the previous
period and matching market expectations, a preliminary estimate showed. That was the
weakest pace of expansion since the second quarter of 2017, as investment growth remained
the slowest since early 2017. The slow down in GDP of United Kingdom resulting to slow
down in productivity in the country and might lead to firms dismissed their workers and
could not afford to pay higher salaries and wages which lead to the fall of private
consumption on goods and services. This would affect investors and international
corporations in their investment decisions where in this event, the investors might step back
and sell their shares in United Kingdom, resulting to depreciation of GBP. Thus, GBP had
depreciated -0.01% from 1.2159 in July 2019 to GBPUSD 1.2158 in August 2019.

Lastly, in September 2019, pound sterling currency started at GBPUSD 1.2289 from
1.2158 in August 2019. This shows that GBPUSD had increased 1.08% to 14240.0000 in
September 2019 from 1.2158 in the previous trading session. This means that USD had
depreciated 1.08% because in September 2019, 1.2289 of USD is needed to be traded with
GBP 1 from 1.2158 of USD needed to be traded with GBP 1 in the previous trading session.

The rise in pound sterling currency may be due to United Kingdom trade deficit rose
to GBP 3.36 billion in September 2019 from an upwardly revised GBP 1.76 billion in the
previous month. This was the largest monthly trade shortfall since May, as imports surged 3.9
percent while exports advanced at a slower 1.1 percent. Exports from the UK increased 1.1
percent from a month earlier to GBP 55.59 billion, following a revised 0.3 percent drop in the
previous month. Trade deficit is an economic measure of international trade where the
country’s imports exceed its exports. This represents an outflow of domestic currency to
foreign markets. This means that high exports had increased foreign currency deposits
resulting in strengthening the GBP. Thus, the GBP appreciated 1.08% from GBPUSD
1.2158 in August 2019 to GBP USD 1.2289 in September 2019.

In conclusion, the foreign exchange market of a country as well as in the international

scenario is like any other market as per the theoretical economic framework and the
equilibrium and the stability in this market is also determined by the demand and the supply
forces. The consumers and the suppliers in the currency market mainly are comprised of the
multinational companies, the international banks and those speculators who invest in the risk
and returns in the market. The demand supply model in the foreign exchange market
attributes the determination of the value of a currency at any particular point of time, to the
demand and the supply scenarios present in the market during that time. These in turn gets
determined by the
economic factors like the rate of inflation, interest rate and the regulatory policies taken by
the governing governing authority of the concerned country.