1. The British Pound (£) Tom DegnanDavin Costa Tom LacnyBrian Billick Manuel Davila

2. Schedule of Events Current Status of the Pound Current Status of the Pound Historical Graphs of the Pound Historical Graphs of the Pound Short Term Analysis and Forecast Short Term Analysis and Forecast Long Term Analysis and Forecast Long Term Analysis and Forecast

3. Current Status of the Pound Trading at 11 year highs against USD Trading at 11 year highs against USD 1992 George Soros – “Man who broke the British Pound.” 1992 George Soros – “Man who broke the British Pound.” What is fueling the rally of the pound? What is fueling the rally of the pound? 1. Strong UK fundamentals – Hiking bias 2. US Dollar weakens 3. Technical Outlook 4. Short Term Fundamentals Favor Gains

4. Friday, February 18, 2005 1 GBP in GBP American Dollar1.89490.527732 Australian Dollar2.405310.415747 Brazilian Real4.862320.205663 Canadian Dollar2.329590.42926 Chinese Yuan15.68310.0637627 Danish Krone10.78860.0926903 Euro1.449250.69001 Hong Kong Dollar14.77910.0676632 Indian Rupee82.8640.012068 Japanese Yen200.2720.00499321 Malaysian Ringgit7.200620.138877 Mexican Peso20.9870.0476486 New Zealand Dollar2.614740.382448 Norwegian Kroner12.0110.0832569 Singapore Dollar3.104420.322122 South African Rand11.250.0888887 South Korean Won1940.380.000515363 Sri Lanka Rupee188.0690.0053172 Swedish Krona13.20180.0757474 Swiss Franc2.240150.446398 Taiwan Dollar59.61360.0167747 Thai Baht73.08630.0136824 Venezuelan Bolivar3629.110.000275549

5. History and Graphs of the British Pound

6. History of British Currency England was unified under William the Conqueror in 1066 England was unified under William the Conqueror in 1066 The Pound (GBP) was introduced into England by the Normans even before William I conquered England. The principle subdivisions of the Pound Sterling (or Gold Sovereign) were into 20 Shillings or 240 pence, but it was also divisible into the Guinea (21 Shillings or 1.05 Pounds), Crown (5 Shillings), Florin (2 Shillings) and Farthing (1/4 Pence). The Pound (GBP) was introduced into England by the Normans even before William I conquered England. The principle subdivisions of the Pound Sterling (or Gold Sovereign) were into 20 Shillings or 240 pence, but it was also divisible into the Guinea (21 Shillings or 1.05 Pounds), Crown (5 Shillings), Florin (2 Shillings) and Farthing (1/4 Pence). The Bank of England was created on July 27, 1694 The Bank of England was created on July 27, 1694 The United Kingdom left the Gold Standard several times, only to keep reinstating it until it was finally abandoned on June 23, 1972. Throughout this time period, the rate at which the Bank of England would buy gold remained constant at 3 pounds, 17 shillings, 10.5 pence. The United Kingdom left the Gold Standard several times, only to keep reinstating it until it was finally abandoned on June 23, 1972. Throughout this time period, the rate at which the Bank of England would buy gold remained constant at 3 pounds, 17 shillings, 10.5 pence. Exchange rate controls were finally abolished in 1979. Exchange rate controls were finally abolished in 1979. (All of the above can be found at: (http://www.globalfindata.com/frameset.php3?location=/gh/index.html ) ) (All of the above can be found at: (http://www.globalfindata.com/frameset.php3?location=/gh/index.html ) )http://www.globalfindata.com/frameset.php3?location=/gh/index.html

7. Coin Written As Spoken As Circulation Dates How expressed in £ s d farthing1/4d1279-1956 half penny 1/2dhape-nee886-1967 penny1d?-1967 silver threepence 3dthrippence1551-1944 groat4d1279-1888 sixpence6d a tanner 1550-1967 shilling1/- a bob 1548-1967 1s 0d florin2/-1849-1967 2s 0d half-a-crown2/6 half a dollar 1526-1967 2s 6d crown5/- a dollar 1544-current* 5s 0d nobel 6s 8d 1464-1642 pound20/- a quid ?-current £1 0s 0d sovereign20/-?-?**£1 half-sovereign10/-?-?**10s guinea21/-1663-1813*** £1 1s 0d

8. British Currency after 1971 On February 15, 1971, Britain adopts the decimal system On February 15, 1971, Britain adopts the decimal system The change essentially made one British Pound equal to 100 pence. The change essentially made one British Pound equal to 100 pence. The 5 pence piece replaces the shilling, and the 10 pence piece was introduced to replace the florin The 5 pence piece replaces the shilling, and the 10 pence piece was introduced to replace the florin Both the half-penny and half-crown were removed from circulation Both the half-penny and half-crown were removed from circulation Banks were closed for 4 days in order to fully embrace the new currency rates Banks were closed for 4 days in order to fully embrace the new currency rates Note: Previous chart obtained from (http://gouk.about.com/cs/literature/l/blbritcurr.htm) Note: Previous chart obtained from (http://gouk.about.com/cs/literature/l/blbritcurr.htm)

9. Copper Smallest Coin 1p One pence 2p Two pence Silver Smallest Silver Coin 5p Five pence 10p Ten pence Small 7 sided Coin 20p Twenty pence Large 7 sided Coin 50p Fifty pence Yellow£1 One pound or quid £2 Two pound or quids NotesGreen£5 Five pounds or "a fiver" Orange and grey £10 Ten pounds or "a tenner" Blue£20 Twenty pounds There are notes of higher denominations, but these are not so common and you probably won't see them in general circulation. Note: Chart and above info obtained from (http://gouk.about.com/cs/photoswebcams/l/bldecandmec.htm)

10. British Pounds to 1 JPY 120 days latest (Feb 18) - 0.00499321 lowest (Dec 14) - 0.00492261 highest (Nov 19) - 0.0052299

11. British Pounds to 1 CHF 120 days latest (Feb 18) - 0.446398 lowest (Aug 27) - 0.434922 highest (Nov 19) - 0.464078

12. British Pounds to 1 CAD 120 days latest (Feb 18) - 0.42926 lowest (Dec 20) - 0.417414 highest (Nov 12) - 0.45224

13. British Pounds to 1 USD 120 days latest (Feb 18) - 0.527732 lowest (Dec 20) – 0.513294 highest (Sep 7) – 0.56392

14. British Pounds to 1 EUR 120 days latest (Feb 18) - 0.69001 lowest (Aug 27) - 0.671001 highest (Dec 30) - 0.708792

15. GBP Short Term Forecast Current Economic Conditions The UK has experienced 44 consecutive quarters of expansion Bank of England enacted a highly restrictive monetary policy raising rates on 5 consecutive occasions last year Bank of England enacted a highly restrictive monetary policy raising rates on 5 consecutive occasions last year UK faces rapidly growing trade deficit which could force a downward adjustment in the currency. The latest report showed a gap of –5300M GBP vs. expectations of only –4750M UK faces rapidly growing trade deficit which could force a downward adjustment in the currency. The latest report showed a gap of –5300M GBP vs. expectations of only –4750M

16. GBP Short Term Forecast 2005 Implications Short GBP futures not pricing at a rate hike over the next year Short GBP futures not pricing at a rate hike over the next year Bank of England has the option of materially easing monetary policy should growth in UK rapidly deteriorate. Bank of England has the option of materially easing monetary policy should growth in UK rapidly deteriorate. Large interest rate differential between GBP and USD has raised speculative positions from carry traders. Increases volatility and speculation effect on currency value. Large interest rate differential between GBP and USD has raised speculative positions from carry traders. Increases volatility and speculation effect on currency value. Political fortune of Tony Blair and the Labor party is at stake. Political fortune of Tony Blair and the Labor party is at stake.

17. GBP Short Term Forecast Prediction The British Pound will encounter a short term downtrend

18. Great Britain Pound Long-Term Forecast

19. UK Trade £3.0 billion deficit in Dec 2004 http://www.statistics.gov.uk/CCI/nugget.asp?ID=199

20. The Numbers… http://www.statistics.gov.uk/instantfigures.asp

21. The Facts… The deficit on trade in goods in December was £4.4 billion – £0.3 billion less than the deficit for November. The deficit with the enlarged EU worsened to £2.4 billion The deficit on trade in goods in December was £4.4 billion – £0.3 billion less than the deficit for November. The deficit with the enlarged EU worsened to £2.4 billion The value of exports to non-EU increased across a wide range of manufactured goods. As a result the deficit with non-EU countries improved to £2.1billion. The value of exports to non-EU increased across a wide range of manufactured goods. As a result the deficit with non-EU countries improved to £2.1billion. The European Commission has announced its support for 10 more countries to join the EU from the beginning of 2004.Taken together these countries accounted for 2% of UK exports and 2% of UK imports in 2001. The European Commission has announced its support for 10 more countries to join the EU from the beginning of 2004.Taken together these countries accounted for 2% of UK exports and 2% of UK imports in 2001.

22. The Bottom Line… Increasing Trade Deficit with the EU Increasing Trade Deficit with the EU Increasing number of countries that trade with the UK are joining the EU Increasing number of countries that trade with the UK are joining the EU Could lead to an increase in trade deficit in the future - which would mean excess supply and devaluation Could lead to an increase in trade deficit in the future - which would mean excess supply and devaluation

23. CITY GUIDE TO A UK EURO CHANGEOVER CHART 1: A UK EURO CHANGEOVER Notes: D = Government decision to join; R = Referendum; T = UK entry: fixed conversion rate; sterling wholesale financial markets in euro; RT = full-scale retail payment and transaction processing infrastructure and services available; E = end of transition period; euro notes and coin introduced as legal tender in the UK; S = end of legal tender for sterling notes and coin. http://www.bankofengland.co.uk/Links/setframe.html