Trading GBP/USD Currency Pair: What You Need To Know
GBP/USD is one of the most traded currency pair in the forex market as it pits currencies of two of the biggest economies in the world. The pound (GBP) representing the United Kingdom economy and USD representing the U.S economy are part of the exclusive club of majors in the currency market.
In the GBP/USD pair structure, the British Pound acts as the base currency while the U.S dollar acts as the quote currency. In its purest form, the structure GBP/USD translates to the amount of dollars that one would need to buy one British pound.
While the forex market is opened 24/7, the best time to trade the GBP/USD pair is when the U.S and the U.K markets are opened. Economic releases from the U.K and the U.S influence a great deal how the currency pair moves in terms of price action. Similarly, the best time to trade the currency pair is between 8:00 AM U.K time and 19:00 GMT.
What Influences GBP/USD Price action
Economic releases from the U.S and the U.K influence a great deal of the direction in which GBP/USD moves in terms of price action. Reports on GDP as well as employment data and interest rates influence the strength of the two currencies.
Similarly, data on inflation rates, as well as political shifts within the two economies, influence traders’ trading activities, which significantly influence price action. Monetary policies by the U.K’s Bank of England, as well as the Federal Reserve, also influence GBP/USD price action activity.
Why GBP/USD is Important
The British pound to U.S dollar currency pair is one of the most traded currency pairs because of the amount of liquidity it commands in the market. High, liquidity levels makes it possible for traders to enter and exit trades at preferred price points.
The high levels of liquidity also means GBP/USD comes with some of the lowest bid and ask spreads which essentially minimizes the amount of fees that traders have to incur on each position opened. The currency pair is also associated with high volatility levels, which make it possible to enter and exit positions with ease.
News regarding this currency pair is also very much available, which makes it possible to carry out fundamental analysis in trying to ascertain the intrinsic value of the pair. Readily available economic updates from the U.S and the U.K also gives rise to sharp price movements of the pair ideal for traders looking to benefit from currency fluctuations
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