The foreign exchange market—also known as the forex or FX market—is the largest and most liquid financial market in the world, with over $5 trillion traded daily. Forex trading involves simultaneously buying one currency and selling another. Common examples include EUR/USD (euro vs US dollar) and GBP/JPY (British pound vs Japanese yen).
Understanding how forex currency pairs work is essential, as they are the foundation of all forex trading strategies.
The first currency in a forex pair is the base currency, and the second is the quote currency. Traders speculate on whether the base currency will strengthen or weaken relative to the quote currency.
For example, when trading GBP/USD:
Profit and loss are typically measured in the quote currency. Learn more in our how to trade forex guide.
Each currency pair has two prices:
The difference between these is called the spread, which represents the cost of trading.
The table below illustrates basic bid and offer prices:
← Swipe →
Currency pair | Quotation | Bid | Offer | Client buys | Client sells |
|---|
EUR/USD | 1.1200/01 | 1.1200 | 1.1201 | 1.1201 | 1.1200 |
GBP/USD | 1.5550/53 | 1.5550 | 1.5553 | 1.5553 | 1.5550 |
EUR/GBP | 0.7210/11 | 0.7210 | 0.7211 | 0.7211 | 0.7210 |
There are many currency pairs available, but the most widely traded are known as major forex pairs. These all include the US dollar (USD), which is linked to the world’s largest economy.
The euro and US dollar: EUR/USD
The US dollar and Japanese yen: USD/JPY
The British pound sterling and US dollar: GBP/USD
The US dollar and Swiss franc: USD/CHF
The Australian dollar and US dollar: AUD/USD
The US dollar and Canadian dollar: USD/CAD
The New Zealand dollar and US dollar: NZD/USD
Major pairs are among the most actively traded FX markets because they include the US dollar. According to the BIS 2025 Triennial Survey, the US dollar was on one side of 89.2% of all FX trades in April 2025. Because of their high liquidity, they typically have.[1]
These characteristics make them especially popular among both beginner and experienced traders.
Spread bet and trade CFDs on currency pairs
Major forex pairs are the most frequently traded due to their liquidity and global relevance.
High trading volume generally leads to:
Faster execution
Lower transaction costs
More consistent pricing
You can use a demo account to explore how currency-pair pricing works before deciding whether live spread betting or CFD trading is appropriate for you.
A pip (percentage in point) is the smallest standard price movement in a currency pair, typically the fourth decimal place.
For example:
Pip values are important because they determine:
Currency pairs with higher volatility may produce larger price movements, but this also increases risk, particularly for short-term trading.
Currency pairs are traded as a single instrument. Traders either buy (go long) or sell (go short) depending on their market outlook.
Example:
EUR/USD = 1.3560 / 1.35602 (sell / buy)
To buy EUR/USD, you pay 1.35602 USD per euro.
To sell, you receive 1.3560 USD per euro.
Trading scenarios:
Read more examples of short-selling currencies via spread betting and CFD trading.
Trade on forex indices
EXCLUSIVE TO CMC
Expecting major economic announcements? Our forex indices are a collection of related, strategically-selected pairs, grouped into a single basket. Trade on our 12 baskets of FX pairs, including the CMC USD Index and CMC GBP Index.
Open an account
Deposit funds and start spread betting or trading CFDs. Learn more about spread betting trading.
Choose your currency pair
We offer over 330 pairs, including majors, minors and exotics.
Build a trading strategy
Decide whether to go long or short based on your market outlook.
Stay informed
Follow market news, including interest rate and inflation updates. What is forex trading?
Manage your risk
Use tools like stop-loss orders to help manage risk.
The forex market operates electronically through a global network of banks, without a central exchange. It runs 24 hours a day, five days a week.
This means prices can move in response to global events, including outside normal UK market hours.
Exchange rates fluctuate based on economic strength, market sentiment, and global events.
Key drivers include:
Commodity prices can also influence certain currencies. Countries with strong natural resource exports—such as oil or metals—often see their currencies move in line with commodity prices.
Examples include:
Oil-exporting countries
Resource-heavy economies
Forex pairs are interconnected, meaning they often move in relation to one another.
For example:
Understanding correlation helps traders:
Avoid overexposure to similar positions
Diversify their portfolio
Identify potential trading opportunities
Positive (move in the same direction)
Negative (move in opposite directions)
Neutral (no clear relationship)
High liquidity can support execution
Tighter spreads may reduce trading costs
Major pairs may be less volatile than some less liquid pairs
Strong economic backing from major global economies, while still carrying market risk
They can still move sharply and cause losses
Interest rates set by central banks are a major factor influencing these currencies, making them central to forex trading strategies.
Forex trading involves speculating price movements between currency pairs.
There are three main types of currency pairs:
1. Major pairs
Include USD and have the highest liquidity.
2. Minor pairs (crosses)
Do not include USD (e.g. EUR/CHF, GBP/AUD).
They provide exposure to currency relationships that do not include the US dollar, but liquidity and spreads can vary.
3. Exotic pairs
Include currencies from emerging markets.
They tend to have:
Lower liquidity
Wider spreads
Higher volatility
Getting started
Forex currency pairs are the foundation of the FX market. A strong understanding of how they are structured, how they move, and how they are traded allows traders to make more informed decisions.
[1] Source: Bank for International Settlements, 2025 Triennial Central Bank Survey: OTC FX turnover in April 2025.