Currency pairs in forex
A currency pair is normally the quotation of the currencies which is traded in the forex market; the value of one currency is
usually determined by comparing it to another currency. Currencies are always traded in pairs, that is, we buy one currency
pair and sell another as we trade on the forex market. For example, when we trade on the EUR/USD pair, we are either
buying or selling the Euro against the U.S. dollar.
Reading Currency Pairs
Let’s take the example of the most traded EUR/USD pair. Here, EUR is known as the Base Currency, while USD is seen as the Quote or Counter Currency.
The exchange rate of a currency versus other currencies normally reflect according to the country’s economic health compared to other countries economies. Currency symbols always have three letters, usually the first two letters are used to identify the country, while the third one identifies the name of the country’s currency. If we take the USD for instance. US stands for the United States and D stands for dollar. This applies the same for the NZD = New Zealand Dollar.
|Find more about more currencies symbols in the table below:|
|USD||US Dollar||United States|
|GBP||Pound Sterling||Great Britain|
The currency market is the largest financial market in the world and most of this trading is based in the world’s major financial centers such as London, New York, Tokyo and Sydney. Major banks and multinational corporations also contribute majorly to this financial activity. There are different trading sessions and markets tend to move or react more when market remains open for these session: America Session, Asian Session, European Session and Sydney Session. Read more on Forex here.
Events Impacting Pairs
Central banks vote on where to set the cash rate and this decision has a huge impact on
the trend of the country’s currency, along with other major pairs.
Interest Rate Decision
Gross Domestic Product is the broadest measure of economic activity and it is also a key
indicator of a country’s economic health and a currency impact positively or negatively
according to the country’s economy.
Released on the first Friday of every month, the Nonfarm Payrolls measures the number of people
employed in the previous month. Since job creation play an important role in a country’s economic
activity, readings for this event create bullish or bearish trend for the USD, depending on report.
Unemployment is also a major indicator of a country’s economic condition and this may also cause
a direct impact on the rate of a currency.
Speeches by central bank governors or the chairman and leaders also create an impact on a
country’s currency rate, for a short-term period.
Speeches by influential personalities
Let’s have a look at major currency pairs crosses in the table below: