Currency Pair
The quotation of two currencies together, showing how much of the quote currency is needed to buy one unit of the base currency.
What is Currency Pair?
A currency pair expresses the exchange rate between two currencies. The first listed currency is the base currency and the second is the quote (or counter) currency. A quote of EUR/USD = 1.0850 means one euro buys $1.0850. Major pairs — EUR/USD, USD/JPY, GBP/USD — involve the US dollar and have the highest liquidity and lowest spreads. Cross pairs (EUR/GBP, AUD/JPY) do not include the US dollar. Exotic pairs combine a major currency with a currency from a smaller or emerging economy. Currency pairs move based on relative economic strength, interest rate differentials, geopolitical events, and capital flows between the two countries. Forex trading is the largest financial market in the world by daily volume.
Example
EUR/USD is the world's most traded currency pair, accounting for roughly 22% of daily FX volume. When the European Central Bank raises rates while the US Fed holds steady, euro interest rates become more attractive, increasing demand for euros and pushing EUR/USD higher. A trader who expected this outcome and bought EUR/USD at 1.05 and sold at 1.10 would profit $500 per standard lot of €100,000.