What is the Future of the British Pound?

The drastic 8 percent plunge of the British pound against the U.S. dollar, and the uncertainty as to how Britain should interact with Europe, has many questioning what the role of the British pound, and Britain itself, will be in the future.

The currency’s 8% decline versus the dollar this year has the feel of something more than a cyclical move. A currency that functioned as the world’s reserve currency for a century and a half before the dollar took on that role, and which fostered financial institutions such as central banking, may be sliding into the sunset.

The triggers for the most recent bouts of sterling selling have come from a string of relentlessly weak U.K. economic numbers, which have raised fears of a “triple dip” recession — at least until this week’s surprisingly positive data from the services sector. But the bigger story is a more existential one: with the turmoil experienced since 2007 in its most powerful industry — banking — and the euro zone charting a more independent course, many are wondering what Britain’s role in the world will be.

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