GBP/USD Trading Tips

 

GBP/USD Trading

The British pound to US dollar exchange rate is denoted by the ticker GBP/USD. GBP-USD is a member of the 'majors' category, which includes the currency pairings with the biggest daily trading volumes. The USD is included in all of the pairings in the majors group. 

Aside from being one of the oldest traded pairings, the GBP/USD is also one of the most liquid, with far narrower spreads than the minors. 

The pound sterling is the base currency in the GBP/USD currency pair, while the US dollar is the quotation currency. This implies that the GBP-USD exchange price at any one moment indicates the number of US dollars required to swap for one British pound.

GBP/USD Chart History

The GBP USD has an intriguing history since it reflects currencies that have served as the world's de facto reserve currency at various points throughout history. Britain conquered the United States, and the pound sterling controlled international banking before World War I erupted in 1914, with the currency holding more than 60% of worldwide debt. 

The US dollar eventually caught up with the pound in the 1920s, and by 1944, in tandem with the global implementation of the Bretton Woods monetary system, currencies began floating freely against each other in the markets.

 It was not until the system's dissolution in 1971 that currencies began floating freely against each other in the markets. Currently, the US dollar is the most widely held reserve currency in the world. 

The pound is ranked third, slightly behind the euro (EUR). The GBP/USD has traditionally been referred to as the Cable, after the first transatlantic communication cable that linked the United Kingdom with the United States and was used to communicate exchange rates between the two nations.

The Highs and Lows

The GBP-USD has had several high points in its history when it first began trading. In 1992, on September 16th, dubbed "Black Wednesday," the GBP/USD fell by 25% when Britain exited the European Exchange Rate Mechanism. A more recent highlight would be the 2016 referendum that secured the United Kingdom's withdrawal from the European Union. 

The GBP/USD fell more than 10% in one day when news broke that the UK had decided to leave the EU. Aside from those highlights, the GBP/USD pair has historically reached all-time highs of 2.466 and all-time lows of 1.05. All of these extremes appeared in the 1980s. During the global financial crisis of 2007/08, the pair reached highs of 2.11 and lows of 1.426.

GBP/USD Influencing Factors

Monetary policy is a crucial element affecting the GBP/USD, as seen by one of the pair's biggest highlights. The Bank of England publishes interest rates once a month in the United Kingdom. It is critical to note that the Bank of England does not issue a rate statement while it maintains interest rates, but does so when it raises or lowers rates. 

In the United States, the Federal Reserve will disclose interest rates eight times every year; and since the US dollar is the world's biggest reserve currency, the eight days are critical for the markets.

Employment figures are especially important for both economies since they normally drive monetary policy for Central Banks. The US Bureau of Labour Statistics and the UK Office of National Statistics both provide employment numbers on a monthly basis. 

The numbers normally cause a lot of volatility in the GBP/USD exchange. Furthermore, the GBP/USD has proved to be particularly sensitive to political news, and traders should keep an eye on political developments in both the UK and the US in order to capitalize on any triggers to. The GBP/USD is likewise associated with, although it is adversely correlated with.

GBP/USD Trading Frequently Asked Questions

What is the appeal of the GBP/USD?

The GBP/USD forex pair, commonly known as the cable, is one of the most established and widely traded currency pairs. The name "cable" alludes to the practice of sending Pound price quotations over an underwater cable that spanned the Atlantic in the nineteenth century. 

Because the United Kingdom and the United States have strong links and extensive trade agreements, there is always a high need for firms on both sides of the Atlantic to convert Pounds for dollars or vice versa. This liquidity has also increased the pair's popularity among retail traders.

Why should I invest in the GBP/USD?

As one of the most liquid currency pairs, traders benefit from narrow spreads, excellent liquidity and fills, and enough volatility to make GBP/USD trading both intriguing and lucrative. When it comes to volatility, the pair often trades in a greater range on a daily basis than other pairs. 

This certainly enhances the possibility of profit when trading the pair, but it also raises the risk. As one of the most traded currency pairings, traders will discover a plethora of information on the GBP/USD, as well as a variety of trading options, ranging from futures to CFDs.

What is the greatest trading technique for the GBP/USD?

There are a lot of good systems for trading GBP/USD. Which is better will be determined by current market activity (trending versus range-bound) as well as the trader's risk tolerance and trading attitude. 

Trading breakouts in the pair is a helpful approach. This method works effectively for GBP/USD since the pair has a strong inclination to move after a breakthrough. Other traders prefer to concentrate on news reports and trade the volatility that often accompanies big pronouncements from the United States and the United Kingdom.