GBP/USD

The GBP/USD is the currency pair encompassing the United Kingdom’s currency, the British pound sterling (symbol £, code GBP), and the dollar of the United States of America (symbol $, code USD).

The pair’s rate indicates how many US dollars are needed in order to purchase one British pound. For example, when the GBP/USD is trading at 1.5000, it means 1 pound is equivalent to 1.5 dollars.

The GBP/USD is the fourth most traded currency pair on the forex exchange market, giving it ample liquidity and a low spread.

Whilst the spreads of currency pairs vary from broker to broker, generally speaking, the GBP/USD often stays within the 1 pip to 3 pip spread range, making it a decent candidate for scalping.

The GBP/USD pair, also informally known as “cable” (due to transatlantic cables being used to transmit its exchange rate via telegraph back in the 19th century) has a positive correlation with the EUR/USD, and a negative correlation with the USD/CHF.

Trading the GBP/USD

Whilst a lot of traders and even brokers will assert that the best time to trade the GBP/USD is during its most active hours during London and New York, doing so can be a double-edged sword due to the often-unpredictable nature of the pair.

Its volatility also fluctuates often, and so what could be a profitable looking strategy one month, may not be so productive in later months.

In addition, purely technical traders can really struggle to be consistent with this pair, (i.e. by ignoring fundamentals), due to the unique political nature of the United Kingdom.

The recent drama surrounding Brexit has added another layer of uncertainty to this currency pair.

With a smooth resolution not in the cards for the foreseeable future, it is clear the GBP/USD will be influenced by any developments and negotiations with the European Union.