1 Pound – United Kingdom

In 1983, the United Kingdom's currency situation was characterised by the ongoing struggle to maintain the value of the pound sterling within the European Exchange Rate Mechanism (ERM), which it had joined in 1979. The government, led by Prime Minister Margaret Thatcher and Chancellor Sir Geoffrey Howe, was committed to a strong pound as a cornerstone of its anti-inflationary monetary policy. However, this policy created significant tension, as the high exchange rate severely damaged the competitiveness of British exports, exacerbating the deep recession and record unemployment that had marked the early 1980s.

The strong pound was largely a product of the government's Medium Term Financial Strategy and the high interest rates necessary to control money supply growth and curb inflation, which had peaked at over 20% in 1980. While this succeeded in bringing inflation down to around 5% by 1983, it attracted substantial hot money inflows, keeping sterling artificially high. This "oil premium"—a belief that sterling was a petrocurrency buoyed by North Sea oil revenues—further complicated management, masking underlying economic weaknesses.

Ultimately, the currency policy of 1983 was a balancing act with profound domestic consequences. The strong pound helped break the inflationary spiral but at the cost of industrial decline, particularly in manufacturing. This period set the stage for future turmoil, as the contradictions between a high sterling parity, domestic economic needs, and ERM commitments would eventually culminate in the Black Wednesday crisis of 1992, when the UK was forced to withdraw from the mechanism.