History of the GBP/USD Pair
The British pound sterling and U.S. dollar Forex pair is one of the oldest and most popular currency pairings, and it is also known as trading the “Cable.” The nickname comes from the first transatlantic underground cable between North America and Europe, when the pound/dollar exchange rates would be wired back and forth. This pair accounts for 17% of all Forex trading volume.
GBP/USD can be a volatile pair to trade because it has lower liquidity than some of the other pairs. This means that the rate can move quickly in any direction right after important economic data is released.
Trading GBP/USD: What You Need to Know
- The central bank of the U.K., the Bank of England, releases its Official Bank Rate monthly. These interest rate decisions have a direct effect on currency exchange rates.
- Apart from interest rate decisions from the Bank of England, there are several other economic indicators to watch for, among them the following:
- U.K. Consumer Price Index: this measure of inflation is an indicator of future Bank of England decisions regarding interest rates.
- Inflation Letter (Bank of England): In a case where inflation moves more than 1 percentage point from the target in either direction, the Bank of England Governor must send an open letter to the Chancellor. Often, the inflation letter will be accompanied by a report and hearings on the situation.
- The U.K. Claimant Count: tracks the number of monthly unemployment claims and can be a good indicator of the overall employment situation.
- Various PMIs: Services, manufacturing, and construction PMIs are also important economic indicators.
- The release of economic reports from the U.S. will also affect the pound-dollar exchange rate. The most important ones to watch are: interest rate releases, GDP reports, retail sales reports, PMI data, and CPI data.
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