Currency Pairs Explained

The Two Parts of Every Pair

Every forex quote has two currencies separated by a slash:

Base currency (EUR): The first currency. This is the currency you are buying or selling. When you "buy EUR/USD," you are buying euros.

Quote currency (USD): The second currency. This is the "price tag." It tells you how much of the quote currency you need to buy one unit of the base currency.

So EUR/USD = 1.0850 means: "1 euro costs 1.0850 US dollars."

If the rate rises to 1.0900, the euro has gotten more expensive in dollar terms. The euro strengthened (or equivalently, the dollar weakened).

If the rate falls to 1.0800, the euro has gotten cheaper. The euro weakened (the dollar strengthened).

The 7 Major Pairs

Major pairs all include the US dollar on one side. They account for the majority of forex trading volume:

These pairs have the tightest spreads (lowest trading costs) and highest liquidity. As a beginner, you should stick to these.

Minor Pairs (Crosses)

Minor pairs, also called cross pairs or simply crosses, do not include the US dollar. They pair two other major currencies:

• EUR/GBP - Euro vs British Pound
• EUR/JPY - Euro vs Japanese Yen
• GBP/JPY - Pound vs Yen (nicknamed "The Beast" for its volatility)
• AUD/JPY - Aussie vs Yen
• EUR/CHF - Euro vs Swiss Franc
• GBP/CHF - Pound vs Swiss Franc
• CAD/JPY - Loonie vs Yen

Crosses have slightly wider spreads than majors but are still very liquid. Some traders prefer crosses because they allow you to trade the relationship between two non-USD economies directly.

Exotic Pairs

Exotic pairs combine one major currency with a currency from an emerging or smaller economy:

• USD/TRY - Dollar vs Turkish Lira
• EUR/PLN - Euro vs Polish Zloty
• USD/ZAR - Dollar vs South African Rand
• USD/MXN - Dollar vs Mexican Peso
• USD/THB - Dollar vs Thai Baht

Exotic pairs have wider spreads (3-20+ pips), lower liquidity, and can make sudden large moves driven by political events or central bank interventions. They are not recommended for beginners.

The Inverse Relationship

Here's something that trips up beginners: EUR/USD and USD/EUR are inverses of each other.

If EUR/USD = 1.0850, then USD/EUR = 1 / 1.0850 = 0.9217.

In practice, you'll almost never see USD/EUR quoted. The market has conventions about which currency comes first (the "base"). EUR/USD is the standard quote, not USD/EUR. Similarly, it's always GBP/USD, never USD/GBP.

But understanding the inverse helps you think about what's happening. If EUR/USD goes up, the euro is getting stronger. Equivalently, the dollar is getting weaker against the euro. Same move, two ways of describing it.