The most fundamental factor affecting the exchange rate of the British pound is the policy formulated by the Bank of England and the Monetary Policy Committee. In addition, there are other factors that affect the exchange rate of the pound, such as the interest rate of the pound and financial factors, including British government bonds, three-month Europound deposit futures, three-month Europound deposits, Financial Times 100 index and cross exchange rate.

1, Bank of England

Since 1997, the Bank of England has obtained the function of making monetary policy independently, but it still has to meet the inflation standard set by the Ministry of Finance.

2. Monetary Policy Committee

The Monetary Policy Committee is mainly responsible for setting the interest rate level.

3. Interest rate The main interest rate of the Bank of England is the lowest lending rate (basic interest rate), and interest rate changes usually have a great impact on the pound.

4. Financial factors

The financial factors that affect the exchange rate of the British pound include British government bonds (gilt-edged bonds), three-month Europound deposit futures (short-term sterling), three-month Europound deposits, Financial Times 100 index and cross exchange rate. The spread between the yield of 10-year gilt bond and the yield of other countries' bonds or US Treasury bonds in the same period will also affect the exchange rate between the pound and other countries' currencies.

The three-month Europound deposit futures contract price reflects the market's expectation of the Europound deposit interest rate in three months. The price difference with other countries' futures contracts in the same period will also cause changes in the exchange rate of the pound.

Three-month Europound deposits are called Europound deposits in non-British banks. The difference between its interest rate and the European deposit rate of other countries in the same period is also one of the factors affecting the exchange rate.

The Financial Times 100 index is the main stock index in Britain. Although it has little effect on the pound, it has a strong linkage with the Dow Jones index in the United States.

5. Economic information

The British economic data affecting the pound include: initial unemployment rate, initial unemployment rate, average income, retail price index excluding mortgage, retail sales, industrial production, GDP growth, purchasing managers index, manufacturing and service industry survey, money supply (M4), income and house price balance.