What is a currency pair?

Base and quote currencies

In a currency pair, the first currency listed is the base and the second is the quote, sometimes called the counter currency. The price states how much of the quote currency is needed to buy one unit of the base. For the pair GBPUSD, a price of 1.25 means one British pound is worth 1.25 US dollars. The base is always one unit, and the price moves as the value of one currency shifts relative to the other.

Reading a pair's price

Because a pair is a ratio, a rising price means the base currency is strengthening against the quote, and a falling price means it is weakening. Quoting the same two currencies in the opposite order inverts the price. Direction in forex is therefore always relative: a move is a statement about one currency against another, never about a currency on its own.

Majors, minors, and exotics

Currency pairs are commonly grouped by how heavily they trade. Major pairs combine the most traded currencies and are the most liquid. Minor pairs, or crosses, combine major currencies without the most dominant one. Exotic pairs include a smaller or less traded currency and tend to be less liquid, with wider spreads.

• Majors: the most traded currencies, with the highest liquidity.
• Minors, or crosses: major currencies paired with each other.
• Exotics: a less traded currency, with lower liquidity and wider spreads.

Pips, the unit of movement

Price movements in a currency pair are usually measured in pips. A pip is the standard smallest increment for the pair, typically the fourth decimal place for most pairs. Expressing moves in pips keeps changes comparable across pairs and is the conventional way spreads and price changes are stated in forex.