Currency pair

A currency pair depicts a quotation of two different currencies. The first currency in the pair is the base currency (or transaction currency). The second currency in the pair is labelled quote currency (payment currency, counter currency). Such a quotation depicts how many units of the counter currency are needed to buy one unit of the base currency.

For example the quotation EUR/USD 1.2500 means that one euro is exchanged for 1.25 US dollar. If the quote moves from EUR/USD 1.2500 to EUR/USD 1.2510, the euro is getting stronger and the dollar weaker. On the other hand if the EUR/USD quote moves from 1.2500 to 1.2490 the euro is getting weaker while the dollar is getting stronger.

Majors

Majors are the most liquid and widely traded currency pairs in the world. Trades involving majors make up about 90% of total Forex trading.

The Majors are: EUR/USD, GBP/USD, USD/JPY, USD/CHF, AUD/USD and USD/CAD.

GBP/USD is the only currency pair with its own name. It is known as "Cable", which has its origins from the days when a cable under the Atlantic synchronized the GBP/USD rate between the London and New York markets.

Cross Rates

Cross rate is a currency pair that does not include USD, such as GBP/JPY. Pairs that involve the EUR are called euro crosses, such as EUR/GBP. All other currency pairs (those that don't involve USD or EUR) are generally referred to as cross rates.

Spread

The usually quoted rate is a "spot price". For a real transaction there are two prices: the lower price (bid) is the price at which a market maker or a brokerage in general is willing to buy the first currency of a pair; the higher price (ask) is the price at which a brokerage is willing to sell the first currency of a pair. See bid/ask spread for more. For example if the quotation of EUR/USD is 1.3607/1.3609, then the spread is USD 0.0002 (or 2 pips). In general, the more popular the pair is, the smaller the differences or spreads. Different brokerage firms have different spreads. Of course a bureau de change may have totally ridiculous spreads but this is usually for small amounts.

Currency correlation

Currency correlation is a statistical measure of the strength and direction of a linear relationship between two currency pairs. Currency correlation is computed as a correlation coefficient. In the broader sense, currency correlation can refer to the correlation between any currency pairs and the commodities, stocks and bonds markets.