Currency Pair

What Is a Currency Pair?

A currency pair is the quotation of two currencies where the first currency (Base Currency) is priced against the second (Quote Currency). In EUR/USD at 1.0850, the euro is the base and the US dollar is the quote. The price tells you that 1 euro equals 1.0850 US dollars.

How Currency Pairs Work

When you buy EUR/USD, you simultaneously buy euros and sell US dollars. When you sell EUR/USD, you sell euros and buy US dollars. Every forex trade involves two currencies. If EUR/USD rises from 1.0850 to 1.0900, the euro has strengthened against the dollar (or equivalently, the dollar has weakened against the euro).

Types of Currency Pairs

Currency pairs are grouped into three categories: Major Pairs (include USD, highest liquidity), Minor Pairs or Cross Pairs (two major currencies without USD), and Exotic Pairs (a major currency paired with a developing economy currency). Most retail trading volume concentrates on the seven major pairs, with EUR/USD alone accounting for about 23% of global forex volume.