Code: USDSymbol: $Subunit: cent (100¢)Central bank: Federal ReserveNickname: greenback / buck
From the Coinage Act to the greenback
The US dollar was established by the Coinage Act of 1792, which created the US Mint and defined the dollar in terms of silver and gold. The name “dollar” derives from the “thaler”, a silver coin minted in central Europe. Paper currency expanded during the Civil War with the “greenbacks” of the 1860s, and the modern monetary framework took shape with the creation of the Federal Reserve in 1913. The dollar’s convertibility to gold ended in stages, definitively in 1971 when President Nixon closed the gold window, ushering in the modern era of floating exchange rates.
The world’s reserve currency
The dollar sits at the centre of the global financial system. It accounts for the majority of central-bank foreign-exchange reserves, the bulk of international trade invoicing, and most cross-border lending. Oil and many commodities are priced in dollars. This central role means the dollar behaves as the world’s premier safe-haven currency: when markets are frightened, money flows into dollars and US Treasuries regardless of where the trouble originated — which is why GBP/USD often falls in a crisis even when the news is not about the UK.
The Federal Reserve
The Federal Reserve System, created in 1913, sets US monetary policy through the Federal Open Market Committee (FOMC), which meets eight times a year. The Fed has a “dual mandate” — maximum employment and stable prices (a 2% inflation goal) — which is broader than the Bank of England’s inflation focus. Because the dollar is the reserve currency, Fed decisions ripple through every other currency, the pound included. See the Federal Reserve profile.
The US Dollar Index (DXY)
The DXY tracks the dollar against a basket of six currencies, with the euro by far the largest component. A rising DXY means broad dollar strength, which usually (though not always) coincides with a lower GBP/USD. Watching DXY alongside Cable helps separate dollar-driven moves from pound-driven ones.
What drives the dollar
Fed interest-rate policy and expectations dominate, followed by US inflation (CPI and PCE), the monthly jobs report (non-farm payrolls), GDP, and global risk sentiment. Because so much of the world borrows and trades in dollars, US data moves not just the dollar but assets everywhere. More in what moves GBP/USD.