Forex trading is one of the world’s largest and most liquid financial markets. Every day, traders across the globe buy and sell currency pairs to take advantage of price movements driven by economic, political, and market-related factors. 

According to the Triennial Survey, trading in over-the-counter (OTC) forex markets reached $7.5 trillion per day in April 2022, a 14% increase from $6.6 trillion three years earlier ^[1].

Before diving into the most popular currency pairs to trade, it’s essential to understand the basics — from what forex trading is to how currency pairs are structured and quoted.

Key Points

• Learn how currency pairs are structured and how they function as the foundation of forex trading.
• Discover the 16 most actively traded major, minor, and exotic forex pairs, including what influences their price movements.
• Explore real-world examples, central bank policies, and economic drivers to better understand currency pair behaviour in global markets.

What is Forex Trading

Forex trading, or foreign exchange trading, involves the exchange of one currency for another with the aim of profiting from changes in their relative value. It is conducted over-the-counter (OTC), meaning trades take place directly between parties, typically through online platforms.

As the world’s largest financial market, forex offers traders the opportunity to access global currencies 24 hours a day, five days a week.

Learn more in our detailed forex trading guide.

How to Read Currency Pairs

All currencies have a three-letter currency code. This normally consists of the first two letters representing the country and the third being the actual currency. For instance, USD is the US dollar, the euro is EUR and GBP is the Great British pound.

Let’s use EUR/USD as an example:

• The first currency is known as the base currency, which is the Euro (EUR)
• The second currency in this pair (the USD) is known as the quote currency

Image 1: Base and quote currency example

What Is a Position in Forex Trading?

A ‘position’ refers to a trade that has been opened in the market.

There are two primary types of positions:

• Long position: This is when a trader buys the base currency and sells the quote currency, expecting the base currency to appreciate in value.

Example: Going long on EUR/USD if you believe the euro will rise against the dollar.

• Short position: This is when a trader sells the base currency and buys the quote currency, anticipating that the base currency will weaken.

Example: Going short on GBP/USD if you expect the pound to fall in value against the dollar.

These concepts are foundational for understanding how forex trading works and interpreting live price quotes effectively.

How Currency Pairs Work

In the foreign exchange market, currencies are always traded in pairs. This means that every transaction involves simultaneously buying one currency and selling another. The goal is to benefit from changes in the exchange rate between the two currencies — either from one strengthening or the other weakening.

When you see a currency pair such as EUR/USD, it represents how much of the quote currency (USD) is needed to buy one unit of the base currency (EUR).

The following examples are for illustrative purposes only and do not represent actual trading recommendations.

Example:

Suppose you exchange €1,000 into US dollars for a holiday when the exchange rate is €1 = $1.10, giving you $1,100. If the rate later shifts to €1 = $1.00, and you convert your money back to euros, you would now receive €1,100 — a €100 gain.

This gain occurred because the euro weakened while the US dollar strengthened. This is the basic principle behind currency trading: capitalising on fluctuations in exchange rates.

Bid, Ask, and the Spread

Currency pairs are always quoted with two prices:

• Bid price: The price at which the market (or broker) is willing to buy the base currency.
• Ask price: The price at which the market is willing to sell the base currency.

Image 2: Bid ask price and pips

Currency Pair	Bid Price	Ask Price
EUR/USD	1.4745	1.4746

In this case:

• A trader looking to go long (buy EUR, sell USD) would do so at the ask price of 1.4745.
• A trader looking to go short (sell EUR, buy USD) would do so at the bid price of 1.4746.

The difference between the bid and ask price is known as the spread. In this example, the spread is 1 pips (0.0001), which represents the trading cost and reflects market liquidity.

Major Currency Pairs

Major currency pairs are the most frequently traded pairs in the forex market. They always include the US dollar (USD) and one of the world’s other leading currencies. Known for their high liquidity and tight spreads, these pairs are popular among traders of all experience levels.

1. EUR/USD

The EUR/USD is the most traded currency pair in the world, reflecting the exchange rate between the euro, the official currency of the eurozone, and the US dollar, the world’s primary reserve currency. Due to the economic size and influence of both regions, this pair dominates global forex volume and its deep liquidity, relatively low transaction costs, and consistently tight bid-ask spreads make it one of the most accessible and cost-efficient pairs to trade.

Monetary policy divergence is one of the key drivers of EUR/USD. For example, in 2022–2023, the pair experienced significant volatility as the US Federal Reserve aggressively raised interest rates to combat inflation, while the European Central Bank responded slower. This widening policy gap caused the euro to weaken substantially, with the pair falling below parity (1.00) for the first time in 20 years ^[2].

Traders should also be aware of how the pair reacts to major economic data releases. US Non-Farm Payrolls (NFP) and Eurozone inflation figures often catalyse short-term price swings. Additionally, EUR/USD tends to show strong reactions during overlapping trading sessions—particularly London and New York hours—when volume and liquidity peak. 

2. GBP/USD

The GBP/USD pair, often referred to as “Cable,” represents the exchange rate between the British pound and the US dollar. Historically rooted in transatlantic financial transactions, this pair is known for its wider daily ranges and greater sensitivity to political and economic news.

Beyond monetary policy from the Bank of England (BoE) and the US Federal Reserve, GBP/USD often responds sharply to market sentiment around the UK economy—including key data such as employment figures, retail sales, and inflation reports. Events such as Brexit negotiations, UK budget announcements, or leadership changes have previously triggered notable price swings in the pair.

3. USD/JPY

The USD/JPY currency pair compares the US dollar with the Japanese yen and is one of the most actively traded pairs in the Asia-Pacific region. It is susceptible to interest rate differentials between the US Federal Reserve and the Bank of Japan (BoJ)—a key driver of its price movements. Japan’s long-standing ultra-low or even negative interest rates make the yen a preferred funding currency for carry trades, where investors borrow in yen to invest in higher-yielding currencies like the US dollar.

When US interest rates increase while Japan maintains low or near-zero rates, it creates a favourable interest rate differential. This environment encourages traders to consider long positions on USD/JPY, aiming to benefit not only from the interest earned on the rate gap but also from any potential strengthening of the US dollar against the yen.

This was especially evident during 2022–2023, when aggressive rate hikes by the Fed—contrasted with the BoJ’s continued dovish stance—drove the pair to multi-decade highs.

However, carry trades come with risk. During heightened market uncertainty or geopolitical stress, traders often unwind their positions, triggering sharp yen appreciation. 

As a result, the yen also functions as a safe-haven currency, strengthening when global risk appetite declines—such as during the early phases of the COVID-19 pandemic or major geopolitical conflicts.

4. USD/CHF

The USD/CHF currency pair tracks the exchange rate between the US dollar and the Swiss franc, commonly referred to as the “Swissie”. The Swiss franc is widely regarded as a safe-haven currency, underpinned by Switzerland’s long-standing political neutrality, robust financial system, and low inflation environment. 

As a result, USD/CHF often reacts to shifts in global risk sentiment—with the franc strengthening during market uncertainty and weakening when investor confidence improves This pair is also influenced by monetary policy divergence between the Swiss National Bank (SNB) and the US Federal Reserve. 

For example, if the Fed is tightening while the SNB maintains accommodative policies, USD/CHF may rise as capital flows favour the higher-yielding dollar. Conversely, dovish signals from the Fed or unexpected SNB intervention—such as currency market stabilisation efforts—can lead to rapid reversals.

5. AUD/USD

The AUD/USD currency pair represents the exchange rate between the Australian dollar and the US dollar, and is commonly referred to as the “Aussie”. This pair is closely tied to the commodity markets, as Australia is a major exporter of iron ore, gold, coal, and liquefied natural gas. When commodity prices rise—particularly iron ore and gold—AUD often strengthens, while falling prices can weigh on the currency’s value.

Interest rate differentials between the Reserve Bank of Australia (RBA) and the US Federal Reserve also play a key role in shaping the pair’s direction. For example, when the RBA adopts a more hawkish stance than the Fed, AUD/USD may climb as investors seek higher yields. Additionally, because of Australia’s close trade links with China, AUD/USD is often viewed as a proxy for Asia-Pacific economic health and broader global risk appetite.

6. USD/CAD

The USD/CAD currency pair compares the US dollar with the Canadian dollar, often referred to as the “Loonie.” It is heavily influenced by movements in crude oil prices, as oil is one of Canada’s most significant exports. When oil prices rise, the Canadian dollar tends to strengthen due to increased revenue and investment inflows; when prices fall, the CAD often weakens, causing USD/CAD to rise.

In addition to commodities, the pair is sensitive to domestic economic data, including employment reports, CPI inflation, and GDP figures from both Canada and the US. Monetary policy divergence between the Bank of Canada (BoC) and the US Federal Reserve can also impact the pair significantly. For example, if the BoC adopts a more hawkish tone while the Fed pauses rate hikes, the Canadian dollar may gain strength against the US dollar.

In 2016, oil prices slumped to decade-lows, with WTI crude falling below $30 per barrel amid global oversupply concerns and weakening demand. As a result, the Canadian dollar came under significant pressure, and USD/CAD spiked to 1.46, meaning it took 1.46 Canadian dollars to buy one US dollar—the pair’s highest level in over a decade ^[3].

7. NZD/USD

The NZD/USD currency pair measures the value of the New Zealand dollar against the US dollar. Often referred to as the “Kiwi,” this pair is influenced by New Zealand’s export-driven economy, particularly its reliance on dairy products, which account for a significant portion of national exports. As such, fluctuations in global dairy prices, along with broader commodity trends, can strongly impact the NZD’s performance.

In addition to trade dynamics, monetary policy from the Reserve Bank of New Zealand (RBNZ) plays a key role. The RBNZ was among the first central banks to adopt inflation targeting and has historically maintained relatively higher interest rates than many of its counterparts, making NZD/USD a preferred choice in carry trade strategies—especially during stable market periods.

Minor Currency Pairs

Minor currency pairs, also known as cross-currency pairs, do not include the US dollar but feature other major global currencies such as the euro, pound, or yen. While less liquid than major pairs, minor pairs still offer substantial trading opportunities and are influenced by regional economic trends and central bank policies.

8. EUR/GBP

The EUR/GBP currency pair reflects the value of the euro relative to the British pound. It is commonly traded by those looking to speculate on the relative economic strength of the eurozone versus the United Kingdom without direct exposure to the US dollar. Movements in this pair are often more subdued compared to others, making it suitable for traders who prefer lower volatility and more range-bound behaviour.

While the pair is influenced by interest rate expectations from the European Central Bank (ECB) and the Bank of England (BoE), it also reacts strongly to evolving political developments. In particular, post-Brexit trade and regulatory discussions between the UK and EU continue to influence sentiment and direction. 

Talks around financial services alignment, customs cooperation, and trade frameworks can cause fluctuations in the pair—even in the absence of major economic data. 

9. GBP/JPY

The GBP/JPY pair is one of the most volatile currency crosses in the forex market, combining the British pound’s sensitivity to news with the Japanese yen’s role as a global safe haven. Its high volatility makes it popular among technical traders and those seeking short-term trading opportunities with wider price ranges.

This pair is heavily influenced by changes in interest rate differentials between the BoE and the Bank of Japan (BoJ), as well as fluctuations in market sentiment. When investors are optimistic, the yen often weakens and GBP/JPY rises; during market uncertainty, capital may flow into the yen, sending the pair lower. 

10. EUR/AUD

The EUR/AUD currency pair pits the euro against the Australian dollar, offering traders a lens into the contrasting dynamics of a service-based European economy and a commodity-dependent Australia. The Australian dollar is closely tied to the export performance of key raw materials—particularly iron ore, coal, and gold—which means global commodity price fluctuations often influence EUR/AUD.

For example, a surge in iron ore prices—driven by increased demand from China—can boost the Australian dollar, pushing EUR/AUD lower. Conversely, a drop in gold prices or weakening demand for natural resources may weigh on the AUD, causing the pair to rise.

11. GBP/CAD

The GBP/CAD currency pair tracks the exchange rate between the British pound and the Canadian dollar, offering insight into the economic interplay between a service-oriented UK and a resource-driven Canada. One of the influences on the Canadian dollar is the price of crude oil, as Canada is one of the world’s largest oil exporters. 

As a result, GBP/CAD is often reactive to changes in global energy demand, OPEC+ decisions, and oil price volatility. For instance, a sharp rise in crude oil prices—triggered by supply cuts or geopolitical tensions—can strengthen the Canadian dollar, causing GBP/CAD to fall. 

Conversely, falling oil prices due to oversupply or slowing global demand can weaken the CAD, pushing the pair higher.

12. EUR/CHF

The EUR/CHF currency pair reflects the close financial and geographical relationship between the eurozone and Switzerland. While it tends to move within relatively narrow ranges due to strong economic ties, it can react sharply to shifts in eurozone confidence or unexpected market shocks. The Swiss franc’s reputation as a safe-haven currency means that during periods of political or financial stress, capital often flows into the franc—causing EUR/CHF to fall.

Traders often use this pair to gauge risk sentiment within Europe, particularly when seeking low-volatility setups or looking for early signals of market tension in the region. Central bank interventions, particularly from the Swiss National Bank (SNB), can also have an outsized impact due to Switzerland’s history of managing franc strength.

Exotic Currency Pairs

Exotic currency pairs consist of a major currency traded against the currency of an emerging or smaller economy. These pairs tend to have lower liquidity, wider spreads, and higher volatility than major or minor pairs. 

While they carry greater risk, they can also present unique opportunities for traders who understand the economic and geopolitical dynamics of the regions involved.

13. USD/SGD

The USD/SGD currency pair reflects the exchange rate between the US dollar and the Singapore dollar, with Singapore being a key financial and trade hub in Asia. The pair is influenced by regional trade flows, economic data from both countries and global risk sentiment, given Singapore’s export-oriented economy.

What makes this pair unique is the Monetary Authority of Singapore’s (MAS) approach to monetary policy. Instead of using interest rates, MAS manages the SGD by adjusting the exchange rate within a controlled band, making currency policy a central tool ^[4]. As a result, USD/SGD often serves as an indicator of Southeast Asia’s economic resilience and Singapore’s external trade strength.

14. USD/HKD

The USD/HKD pair reflects the exchange rate between the US dollar and the Hong Kong dollar, which is managed under a currency peg system. The Hong Kong Monetary Authority (HKMA) maintains this peg within a strict band of 7.75 to 7.85, providing stability and minimising short-term volatility ^[5]. As a result, this pair typically shows limited price fluctuations during normal market conditions.

However, external factors such as US interest rate changes, capital outflows, or geopolitical tensions can place pressure on the peg. When this occurs, the HKMA may intervene to maintain stability, which can briefly introduce volatility. Traders follow USD/HKD closely as an indicator of regional monetary resilience and capital flow dynamics in Asia.

15. EUR/TRY

The EUR/TRY currency pair compares the euro with the Turkish lira, offering high volatility due to the contrast between the euro’s relative stability and the lira’s exposure to emerging market risks. The Turkish lira is highly sensitive to factors such as inflation, political instability, and central bank credibility, often resulting in sharp and unpredictable price movements. This makes the pair attractive to traders seeking momentum-driven opportunities.

The euro side of the pair offers a degree of stability, anchored by the economic weight and monetary policy of the European Central Bank (ECB). As a result, EUR/TRY is frequently used to trade on regional geopolitical developments, including tensions in the Middle East or shifts in EU-Turkey relations. Traders should exercise caution, as the pair’s volatility can present both large potential gains and elevated risk.

16. GBP/ZAR

The GBP/ZAR currency pair reflects the exchange rate between the British pound and the South African rand, a currency known for its high volatility and exposure to commodity market fluctuations. 

South Africa is a leading exporter of gold, platinum, and other minerals, making the rand particularly sensitive to global demand and pricing in the resource sector. As a result, shifts in commodity prices can drive significant movement in the pair.

Getting Started with Currency Pair Trading

Understanding currency pairs is a fundamental step in navigating the forex market, where traders buy and sell global currencies based on economic trends, interest rate movements, and geopolitical events. With access to the right tools and insights, traders can develop informed strategies and manage risk more effectively in this 24-hour market.

Vantage offers a comprehensive trading platform equipped with advanced charting tools, real-time pricing, and free educational resources to support your trading decisions. From live webinars to in-depth market analysis, you’ll find everything you need to build your forex expertise. 

Open a live account with Vantage to explore a wide range of currency pairs and take your first step into the global forex market.

References