The British pound is one of the most important currencies in the world. The pound takes the 4th place in terms of turnover, as well as the third place as a reserve currency.
British pound on Forex
The pound is one of the most popular currencies in the Forex market. It is traded with the currency code GBP.
The British pound is considered to be the most aggressive currency on Forex. It may create an increased volatility in the pair. Therefore, traders can observe sharp impulsive movements.
The most common currencies traded with GBP are the US dollar (GBP/USD), the Japanese yen (GBP/JPY), the euro (EUR/GBP). Currency pairs with the British pound are the most volatile in the market, price fluctuations can exceed 150 points during the trading session. So, take into account its volatility, if you decide to trade these pair. The main trading activity of currency pairs with GBP falls on the European and American sessions.
Trading the GBP/USD currency pair
This currency pair refers to the currency majors on Forex. The United Kingdom and the United States represent the world’s largest banking and financial systems. This trading instrument is quite popular due to the high volatility and liquidity. So, it is one of the favorites among all types of traders: scalpers, day traders, swing traders. Different factors have an impact on the price change. One of the currencies can rise, while another fall, that creates excellent opportunities for earning.
GBP/USD takes the fourth position in terms of trading volume on Forex and is one of the most liquid instruments. More than 13% of all orders opened on Forex account for GBP. In the GBP/USD currency pair, the base currency is GBP and the quoted one is USD. The GBP/USD quotes show how many dollars it takes to buy one pound.
Traders call the pair “cable”. It is called in such way because the first quotes were sent to America through the transatlantic cable in the middle of the 19th century.
GBP/USD has a strong potential of quotes movement. Intraday trading is usually characterized by strong trends and pullbacks. The currency pair may easily overcome the key resistance and support levels, as well as can quickly get corrected back. When important news is published on the Forex market, this currency pair can easily pass more than 100 points per day. The movement of the GBP/USD quotes is influenced by fundamental factors such as:
- the difference in interest rates between the British pound and the US dollar
- reports on inflation
- GDP and other indicators of economic activity
- retail sales
- changes in the unemployment rate
- speeches by the Governor of the Bank of England.
As a rule, all these news is published during the European trading session. Follow data from the US because they can significantly affect the GBP/USD rate.
Traders also note the correlation with EUR/USD. On short-term timeframes, one can easily see that the charts of both pairs move almost synchronously.
This currency pair is popular among traders and provides good opportunities for profit. If you are a beginner on Forex, you can read the daily analysis of the currency majors, which is published on JustForex website. Analytics from JustForex with competent money-management will allow you to receive a stable profit with minimal risk for your funds. Remember that the analytics reflects a personal opinion and should not be perceived as a guide to action.
