The Foreign Exchange Market and its features

In July 1944, 44 countries met in Bretton Woods, New Hampshire, with the aim to establish a fixed exchange rate system and provide for the economic needs and stability of the postwar international system. Goals included financial stability, convertible currencies, free trade, full employment, and economic growth.
Originally, the system was created on the “US dollar which was tied to gold at the value of $ 35 per ounce”.
With the Bretton Woods Agreement it was decided to establish the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development known also as World Bank, two financial institutions designed in order to be sure that the Bretton Woods system operated effectively. The above mentioned financial institutions were designed to make sure that the Bretton Woods system operated effectively. Since exchange rates were fixed, speculators began to play against the British pound in 1967 and this kind of negative effect was denominated creeping pegs.
The massive and intense speculation pushed the Bank of England with other central banks to take action to support the pound. However, their efforts were not enough, so the consequence was that the pound was devalued. The failure was really huge and someone defined it as a monumental one because it was the first time that central bank intervention failed under the Bretton Woods System.
The same thing happened also to the dollar. The Bretton Woods system was tied on a strong US dollar; therefore, when the dollar began to fall down in 1968, the entire system staggered, and speculation against the dollar increased. By 1971 the dollar was in crisis and devaluation was imperative and thus in the summer of 1971, President Nixon decided to take off the U.S Dollar from the gold standard. And this has been considered the beginning of the end, because the floating exchange rates began to materialize and since then inflation has never stopped to grow.