Major forex currency pairs
The major currency pairs on the forex market are those which are the most-traded – ie, they have the highest trading volume. Factors like the supply and demand of the underlying currencies influence the trading volume of a forex pair.
Forex trading is the largest and most liquid financial market in the world. So let’s take a look at the major currency pairs and how they measure up against each other.
What are the major pairs in Forex?
EUR/USD, USD/JPY, GBP/USD, and USD/CHF are traditionally considered the major forex currency pairs. Together, they comprise almost half of forex trading volume. Modern rankings often include additional pairs like AUD/USD and USD/CAD, as their trading volumes can exceed those of USD/CHF.
Here are six of the major forex currency pairs:
- EUR/USD – Euro/US dollar
- USD/JPY – US dollar/Japanese yen
- GBP/USD – British pound/US dollar
- USD/CHF – US dollar/Swiss franc
- AUD/USD – Australian dollar/US dollar
- USD/CAD – US dollar/Canadian dollar
Source: www.bis.org
Combined, these major currency pairs combined account for over 60% of the forex market’s trading volume. You might have noticed that the US dollar is half of every major forex currency pair in this list. And with good reason – it’s the most traded currency in the world.
EUR/USD – euro/US dollar
EUR/USD is the most traded forex pair in the world, comprising around 30% of trading volume on the forex market.
A relatively modern currency pairing – the euro was established in 1999 – EUR/USD is nicknamed ‘fibre’, in reference to the fibre-optic cables used to transmit data between financial markets in Europe and the US.
The price of EUR/USD is heavily affected by the difference in interest rates set by the Federal Reserve and the European Central Bank. Higher interest rates in the EU relative to the US tends to increase the value of the euro relative to the US dollar, and vice versa.
USD/JPY – US dollar/Japanese yen
Japan has one of the largest economies in the world, and is one of the closest trading partners of the US. Similarly, USD/JPY is one the world’s most-traded forex pairs.
The pair’s nickname, ‘ninja’ – an homage to the stealthy assassins of Japanese history – reflects USD/JPY’s sometimes sudden and unpredictable price movements.
Differences in interest rates between the Federal Reserve and the Bank of Japan (BoJ) affect USD/JPY volatility. The BoJ has a history of intervening to influence the value of the Japanese yen, which can cause significant price movements.
For example, in September 2022 the yen fell to a 24-year low against the US dollar. The BoJ intervened by selling dollars and buying yen to stabilise Japan’s currency.
GBP/USD - British pound/US dollar
GBP/USD is the third most-traded currency pair due to longstanding trade relations between the US and the UK, and the size of both economies. At the time of writing, the US is the world’s largest economy by GDP, and the UK is the sixth largest; New York and London are two of the largest financial centres in the world.
First used in the 19th century, GBP/USD’s nickname ‘cable’ refers to the transatlantic underwater telegraph cables used to transmit exchange rates between the US and the UK.
The pair’s price movements often reflect the comparative economic performance of the two countries. Economic indicators like central bank interest rate changes, GDP, trade balance, and inflation rates can have an impact on each currency’s value.
USD/CHF - US dollar/Swiss franc
USD/CHF is the fourth major forex pair. Switzerland is renowned for its economic stability and prominent role in the global financial market.
The Swiss franc – also called the ‘Swissie’, as is the EUR/CHF pair – is widely considered a ‘safe haven’ currency due to its resilience against volatility and negative global trends. But that reputation has been tested. In 2015, for example, the Swiss National Bank (SNB) removed the franc’s peg to the euro, causing significant volatility in the forex market.
Other influences on Swissie prices include differences in monetary policy and economic performance in the US and Switzerland. Interest rates set by the Federal Reserve and the Swiss National Bank, for example, will affect the pair’s performance.
AUD/USD - Australian dollar/US dollar
Nicknamed the ‘Aussie’ for obvious reasons, AUD/USD is one of the most-traded currency pairs. It often surpasses the trading volume of USD/CHF, for example.
The value of the Australian dollar and the AUD/USD pair can change depending on economic performance, monetary policies, and the political environment. Australia is a major commodity exporter, so its economic growth largely depends on the production of assets like oil and gold.
A trade surplus – where the value of a country’s exports exceeds the cost of its imports – indicates strong economic performance, which can cause the Aussie dollar to increase in value. Conversely, a trade deficit is a negative signal that often leads to a decrease in currency value.
USD/CAD - US dollar/Canadian dollar
Canada and the US are close trading partners and their currencies are widely traded, making USD/CAD one of the major forex currency pairs.
USD/CAD is known as the ‘loonie’, named for the loon bird that’s illustrated on one side of the Canadian one dollar coin.
Like Australia, Canada is a major exporter of commodities like oil and natural gas. High oil prices typically lead to a stronger Canadian dollar and a lower USD/CAD, which measures the strength of the US dollar against the Canadian dollar.
Lower commodity prices, on the other hand, can result in a weaker CAD and a higher USD/CAD. Differences in interest rates and trade policy also impact the currency pair.
Additionally, understanding the relative strength of global currencies is essential for forex traders.
Stay informed about times to trade by exploring the forex market trading hours for each major currency pair.
What causes volatility in major currency pairs?
Volatility in major currency pairs is influenced by a range of local, macroeconomic and geopolitical factors. Here are some things to look out for when trading forex – each can influence the value, supply and demand of the underlying currencies.
Economic indicators
Economic indicators including GDP, trade balance, inflation and employment rates measure the economic performance of a country. Growth may signal a rise in currency strength. Conversely, negative results may weaken the currency – causing a pair to rise or fall.
Monetary policy
Monetary policy such as central bank interest rate changes and quantitative easing or tightening can influence market sentiment and currency strength. Typically, high interest rates are met with currency price rises and low interest rates with falls.
Geopolitical events
Geopolitical events like elections, political instability and trade relationships can have a major impact on the volatility of forex currency pairs. Instability leads to lower market confidence, which can reduce the value of a currency. A stable climate, with healthy trade partnerships and policies can increase a currency’s value, impacting the value of the currency pair.
Each major forex pair is subject to the performance of the economies and underlying currencies associated with it. To gain an insight into the movement of your chosen pair, you’ll want to keep an eye on related news and analysis as part of your wider trading strategy.
