For a while after World War II nobody needed to worry about currency fluctuations because currencies were tied to the US dollar under the Bretton Woods system. Exchange controls were in place and some older readers may remember being restricted to taking no more than £50 out of the UK.
But on 15 August 1971 President Nixon announced that the US was ending the convertibility of the US dollar to gold and this led to the end of the Bretton Woods system and fixed-rate currencies – such as sterling – became free-floating.
The following chart shows the fluctuations of GBPUSD since it became free-floating in 1971.
As can be seen, in the decade following 1971 sterling fell against the dollar (almost reaching parity in February 1985); but since then has been broadly trading in the range 1.4-2.0.
The following charts show the monthly changes in GBPUSD for the last 20 years.
The chart below shows the average monthly returns for GBPUSD. For example, on average the rate has fallen 0.39% in January.
- Weak months for GBPUSD have been: February, May, August and November
- Strong months for GBPUSD have been: April, September and October
These observations would seem to have some persistency as they are valid for other periods analysed: 1971-2014 and 2000-2014.