GBP/USD

what is the GBPUSD?

GBP/USD (British Pound vs US Dollar) is the third most traded currency pair in the world. The pair is in the category of major currency pairs and represents Great Britain and the United States of America, the two giant economies of the world. The GBP/USD quote determines the value of 1 British pound for x us dollars. For example, if the quote is 1.1920 that means you will need 1.1920 US dollars to buy one British pound.

Why GBP/USD is called “cable”?

The pair’s other name is “Cable” which refers to the first transatlantic cable that is electronically connecting the two countries since the 19th century.

GBP/USD Basics

GBP/USD has a very reasonable intraday trading range (70 pips on average) which makes it ideal for day trading, scalping, and even for long and medium-term trading. Its standard lot size is 100,000, however, you can also trade small quantities as nearly all retail Forex brokers provide mini and micro lot options on their trading platform. As a trader, knowing the pip value beforehand is important as it helps you to quickly calculate the profit and loss. The pip value of the GBP/USD on a standard lot is 10 US dollars. The Cable spread is usually is very competitive mainly because it is a major currency pair and has enormous liquidity.

GBP/USD Fundamentals

The economic policies of the UK and the US affect the GBP/USD value. For example, the higher interest rate in the US drags the pair value lower. Likewise, better economic conditions and higher interest rates in the UK positively impact the pair. During the 2008 recession, the cable made a historical high of 2.004 mainly because the US dollar remained under pressure on Federal Reserve stimulus measures. However, towards the end of the recession, the US dollar made a comeback and the Cable subsequently dropped below 1.1600. Later in 2016 when the UK decided to leave the EU in a referendum the cable once again lost over 20% in just a month.

It this very important to keep in mind that in the post-Brexit scenario, GBP/USD strongly reacts to the news that relates to the Brexit deal between the UK and the EU.