If you have ever landed in London, opened your banking app, and felt that tiny jolt of disbelief, you are not alone.
One pound shows up as more than one dollar, again, and it feels wrong in the same way a meme coin with eight decimals feels wrong. The U.S. is bigger, the dollar runs the pipes of global finance, half the world prices stuff in USD, so why does a single unit of GBP still “cost” more than a single unit of USD.
The first thing to get out of the way is the thing crypto people are trained to care about, unit price.
In crypto, the unit matters because the unit is tied to supply, and supply is tied to market cap, and market cap is the rough proxy people use for “how big is this thing.” A token at $1 with a trillion supply feels different from a token at $1 with a hundred million supply, because that “$1” sits on top of wildly different totals.
Fiat does not work like that. You can still apply the same instinct, you just need to point it at the right object.
The right object is the pair.
The pair is the product
GBP/USD is a trading pair in the purest sense, and the “1” in front of GBP is basically a UI choice, the same way exchanges choose whether to quote something in sats or BTC.
Today’s reality, in mid January 2026, is that the pound buys roughly $1.34, give or take, and the last six months have mostly lived in that neighbourhood, with an average around $1.34 and a range that has not come close to flipping below parity. That’s on the historical data you can pull from GBP/USD tracking.
That number is the price of one currency in terms of another currency. It is not a scoreboard for national strength, and it is not a “buying power” certificate.
It is closer to ETH/BTC than it is to “the UK versus the US.”
So why does the pound’s unit keep “looking bigger.”
Because units are arbitrary, and history never resets the counter
There is a temptation to treat 1 GBP and 1 USD as comparable “coins” in the same supply system, but they are not. The pound is an older unit; its modern shape is the product of a long history, and the unit size is basically inherited. Nobody recalibrates sovereign currencies periodically to align units across countries.
Countries can change the unit size whenever they want by redenominating, moving the decimal point, swapping notes, or calling it a “new” currency. The public sees a different number, but the economy has not magically gotten richer.
This is why “one yen” being tiny does not mean Japan is weak. It just means the unit is small.
So the question “should the dollar have surpassed the pound by now” assumes there is a finish line where the “bigger” economy eventually gets the “bigger” unit.
There is no finish line, just a floating price.
If you want a crypto analogy, imagine two chains that decide their base unit differently. One chain calls the base unit 1, the other chain calls 1000 of that base unit 1. If you stare at the stickers on the screen, you can convince yourself one chain is “worth more,” even though all that changed is where they put the decimal.
“Dollar dominance” is plumbing, it does not require $1 to beat £1.
The U.S. dollar is still the centre of the system in the ways people actually mean when they say powerful. Reserves, settlement, invoicing, collateral, debt, trade finance, all the boring stuff that makes markets run.
You can see that dominance in the IMF’s COFER reserve currency data, which tracks what central banks hold, and the dollar is still the biggest slice.
That dominance is about usage and network effects. It can exist while the spot quote still shows £1 above $1, because the quote is just the relative price of the two units.
Global relevance does not force a specific integer relationship between units.
So what actually moves GBP/USD
This is where crypto instincts help, because crypto people already accept that price is a product of flows. The difference is the flows are macro.
The pound and the dollar move on some very normal, very human things, money looking for yield, money running from risk, money paying bills.
A good way to frame it for a narrative piece is to think of GBP and USD as two giant buckets of promises, and FX is the market trying to decide how those promises compare today.
The big drivers look like this.
1) Interest rate expectations
Currencies behave a bit like yield bearing assets, because holding them often means holding the short end of that country’s rates, or at least being exposed to that country’s rate path.
Right now the rate story is not massively skewed one way.
The Bank of England cut Bank Rate to 3.75% at its meeting ending 17 December 2025, that is in the official Bank Rate summary.
The Federal Reserve lowered its target range to 3.50% to 3.75% in the 10 December 2025 FOMC statement.
When short rates sit in roughly the same band, it gets harder to build a simple story where “rates alone” should grind GBP/USD down until $1 beats £1.
2) Inflation expectations and credibility
Inflation erodes a currency over time, and the market price reflects who investors think will protect purchasing power better, and who they think will blink first.
In the UK, inflation ticked up to 3.4% in December 2025, and the discussion quickly turned to whether this slows the pace of future BoE cuts. That print is covered in the inflation reporting, and you can triangulate the release cadence through the ONS inflation hub.
A single month does not dictate a currency, but the market is constantly repricing paths, and inflation is a big input.
3) Growth, risk appetite, and the safe haven reflex
When the world gets nervous, the dollar often gets bought. This is not a compliment to U.S. politics or U.S. happiness, it is a reflex built into how global funding works.
If you have ever watched BTC drop while USD liquidity tightens, you already understand the vibe, people rush toward whatever settles bills and collateral fastest.
That safe haven behaviour can strengthen USD without any need for $1 to exceed £1, because again, the unit size is not the story.
4) Trade and capital flows
The UK runs a different external balance profile than the U.S., its assets attract different kinds of investors, and those flows matter. The dollar’s global role also means the U.S. supplies the world with dollars through trade deficits and capital markets, and that supply side interacts with demand in complicated ways.
If you want to be honest in plain English, you’d think this part is messy, and you are right.
Markets are messy.
The part most people mean by “buying power” is not the FX quote
If you’re thinking “okay, but what can I actually buy,” you are asking a different question.
You are asking about purchasing power parity, PPP, the idea that currencies should be compared based on local price levels, the same basket of stuff.
The OECD definition is clean and useful, PPPs are conversion rates that equalise purchasing power by removing differences in price levels, that is the heart of the PPP dataset.
PPP is why a tourist can feel poor in one country and rich in another even when the exchange rate looks “strong.” The spot quote is a market price for money, PPP is a way of translating what money buys in daily life.
To make it relatable, use a Big Mac. The Big Mac Index exists for a reason. It is a silly shorthand for PPP that people actually remember, and the concept is explained in approachable terms.
Here’s a neat crypto-focused mapping.
Spot FX is the exchange price.
PPP is closer to “real value” adjusted for local costs, the way people talk about real yields instead of nominal yields.
Neither is “the truth,” they answer different questions.
So what would have to happen for $1 to “beat” £1
This is the forward-looking part, and it is where the crypto mental model becomes genuinely useful.
Crypto people are used to scenario ranges, because every chart is a probabilistic story about adoption, liquidity, regulation, narratives, and risk. Do the same here.
Parity, GBP/USD at 1.00 or lower, is a regime shift. It is possible, it has happened historically in other pairs, it just needs a persistent set of forces pushing the same way for long enough.
Here are three clean scenarios that you can carry in your head.
Scenario 1, the UK cuts faster, deeper, and for longer
If UK growth stays soft, and inflation falls back, the BoE might cut aggressively. Markets follow expectations, and lower expected returns can drag a currency down.
The constraint is inflation, and right now the inflation story is not fully resolved, with UK CPI ticking up to 3.4% in December, which complicates the “fast cuts” narrative in the near term. That print and the rate expectation chatter is part of the current CPI coverage as well.
For GBP/USD to break below 1.00 on this path, it likely requires years where UK rates sit meaningfully below U.S. rates, plus a growth gap that keeps investors favouring USD assets.
Scenario 2, the UK risk premium rises again
Sometimes currencies do not move because of gentle differentials, they move because investors suddenly demand extra compensation to hold a country’s assets.
If the UK hits a fiscal credibility shock, a political shock, an external financing shock, or another episode where gilt volatility becomes the headline, the pound can reprice quickly.
This is the FX version of a liquidity event, the thing crypto people call a cascade.
Parity becomes plausible if that risk premium stays elevated, because sustained risk premium is the kind of force that changes long run levels.
Scenario 3, the world goes risk off, and USD liquidity wins
If global markets enter a prolonged risk off regime, and USD funding demand rises, the dollar can stay bid for longer than people expect.
Crypto traders recognise this instantly, everything becomes correlated, leverage comes out, and the asset you need to meet obligations becomes king.
In that world, sterling can weaken even if the UK is not “doing something wrong,” and parity becomes more plausible as a side effect of global USD demand.
None of these scenarios require the U.S. to become “more powerful.” They require the market to pay a higher price for dollars relative to pounds.
Power is politics and institutions and scale.
Price is flows and expectations.
The punchline for crypto readers
If you only remember one thing, remember this.
The pound being “worth more” than the dollar at the unit level is mostly an illusion created by unit sizing, and the market price of the pair is the real object of interest.
A stronger narrative for the piece is to treat GBP and USD the way you treat blockchains, as systems that compete on credibility, policy, incentives, and trust, with the exchange rate acting like the live chart of that competition.
When people argue about whether the dollar should be “above” the pound, what they are really doing is trying to make the world feel orderly, like a market cap table.
Currencies do not owe us that kind of order.
They are historical artefacts wrapped around modern macro, and the chart is where those two things meet.
If you want to understand why £1 still buys more than $1, you stop staring at the unit, and you start watching the forces that set the price, rates, inflation, risk, and the constant, quiet question the market asks every day, where do I want to hold my future?
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