The currency pairing of GBP/USD or the Great Britain Pound and the US Dollar, is also referred to by traders as "the cable". To trade the pair, financial market players calls it as “trading the cable”. This phrase is said to have originated from the old days of mid-19th century when transatlantic cable was used for exchanging communications and currency trading between New York and London.
Today, foreign exchange can be transacted without the need of a central location. Traders in New York, London and other parts of the world can trade currency pairs electronically and 24-hours a day. As two of the oldest currencies in the world, the British Pound and the American Dollar forms a solid currency pairing every financial watchers and analysts believes is one of the most appealing money pairs to trade.
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History of the GBP/USD
The Pound is an older currency than the United States dollar as it started circulation in the Anglo-Saxon kingdoms during the 8th century with an exchange rate of 240 pennies per 1 pound.
Compared to the US Dollar which traces its origin back to 179s during the same time of the drafting of the United States Constitution, the US dollar compliments the Euro very well because the two currencies represent the most influential economic regions in the planet.
More than 200 years old, the US dollar has since become the most traded currency in the world, making it the top reserve currency as well.
GBP/USD in a Nutshell
Considered as one of the least volatile currency pairs in the forex market, the Great Britain Pound and US Dollar also has its own seen its share of challenges lately such as the European debt crisis, the US financial crisis of 2008 and the EU referendum on Brexit. This means, just like other currency pairings, the pair is highly reliant on economic, political stability and other events such as inflation, employment and unemployment rates of both countries.
Other than the political climate, the financial institutions of both countries such as the US Federal Reserve and the Bank of England can also influence the price of the GBP/USD.
Understanding the Pip of the GBP/USD
The pip is a term describing the incremental change in value of a currency. It is a standard unit of measure used to gauge fluctuation in the foreign exchange market.
To determine the pip price of the GBP/USD, you need to understand what a pip is. For example, the GBP/USD trades at 1.50020 and the exchange rate changes to 1.50030, it means the pip increased by a single pip. The fourth number following the digital points is the pip.
For computation of the pip price of GBP/USD, you may use 1k lot as a basis. If an example pip of the currency pair is 0.0002, or 1/20000 of 1 USD, you can multiply this by 1000 and come up with a product of $.20. This is the pip value of the 1k micro lot of the Great Britain Pound and US Dollar pair.
Best Time to Trade GBP/USD
Most traders prefer trading during the European trading session when the United Kingdom market releases its current economic data. Volatility always follows during the start of the American trading session.
Why Is the GBP/USD One of the Most Traded Pairs in the World?
A close third behind the EUR/USD and USD/JPY, Great Britain Pound and the US Dollar has cemented its spot in the the top three list of most traded currency pairings in the world. You might wonder what makes this pairing work. Wonder no more as here's two growing reasons why traders continue to have faith on this pairing:
- The United States and Great Britain are owners of not only the oldest modern economies we have today.
- Loads of liquidity and volatility surrounds this pair. An abundance in liquidity allows traders to enter and the market with relative ease.
Trading GBP/USD via CFD
Forex traders are trending towards the CFD (Contract-for-Difference) trading method when engaging in currency pair trades. CFD provides traders extra wiggle room to speculate the volatility of the forex market without requiring owning physical currencies. With the Great Britain Pound and the US Dollar performing as two of the world’s strongest currencies, more traders are embracing the pair via CFD trading.
Contract for difference (CFD) is the agreement between a client and a broker, where one will agree to paying the other the difference in prices from the beginning to the conclusion of the trade. Using the CFD method in trading forex gives forex traders to use greater leverage.
Why Trade Currency Pairs in eToro?
Known for the app’s usability and user-friendly interface, eToro also permits traders to trade on their own time with zero transaction fees on currency trades. eToro also allow traders to trade for $30 for every $1 in their portfolio because it gives out a x30 leverage for currency pairs.
How to Trade GBP/USD Currency Pair on eToro?
- Login or create an account with eToro if you don't have one.
- Click "Discover".
- Select "Currencies".
- Choose "GBPUSD".
- Choose "BUY" or "SELL" depending on the how you wish to trade.
- Enter an amount or number of units you wish to trade.
- Set the stop loss, leverage, and take profit parameters.
- Click "Open Trade".
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