The global currency exchange Exchange Rate System
There are two types of exchange rate system : a fixed exchange rate system and a floating exchange rate system.
A fixed exchange rate country's currency to another country's currency. The government of a country doesn't let the exchange rate change in accordance with the demand and supply for the currency The purpose of a fixed rate system is to maintain a country's currency value within a very narrow band.
The UK operates with a floating exchange rate system. This means that the UK currency is market determined. If the demand for sterling rises relative to supply, then the value of the pound will increase. If the supply of pounds on the foreign exchange market increases relative to demand, then the pound will fall (depreciate) in value.