1 Pound – United Kingdom

In 2004, the United Kingdom's currency situation was defined by its continued membership of the European Union but its deliberate exclusion from the Eurozone. The Labour government, led by Prime Minister Tony Blair and Chancellor Gordon Brown, had established five economic tests in 1997 to determine whether joining the euro would be beneficial for the UK. By 2003, the Treasury's assessment concluded that these tests had not been met, citing that the British economic cycle and structure were not sufficiently aligned with the euro area. Consequently, the pound sterling remained the nation's sovereign currency, and a referendum on adoption, once a key political question, was effectively shelved for the foreseeable future.

The period was one of relative stability and strength for sterling. The UK economy was experiencing sustained growth, and the Bank of England, which had gained operational independence over monetary policy in 1997, maintained a focus on controlling inflation. Interest rates were on a gradual upward path from a low of 3.5% in late 2003 to 4.75% by the end of 2004, which helped support the pound's value. Sterling traded within a robust range, averaging approximately £0.68 against the US dollar and around £0.67 against the euro throughout the year, reflecting investor confidence in the UK's separate monetary policy track.

This distinct currency position underscored a broader political and economic ambivalence towards deeper European integration. While British businesses engaged in cross-border trade faced exchange rate risks and transaction costs, the flexibility of an independent monetary policy was widely seen as a key advantage, especially as the UK's housing market and consumer debt levels were rising concerns. The decision to retain the pound in 2004 thus cemented a path of economic sovereignty, setting a precedent that would heavily influence the UK's relationship with Europe for the next two decades, ultimately foreshadowing the debates that led to the Brexit referendum.