Live GBP/USD Chart
The GBP/USD is a currency pair classified as one the majors. The British Pound qualifies as the currency that is the fourth most traded currency in the world. Only the Japanese Yen, Euro and US Dollar are traded with higher volumes than the British Pound.
The British Pound is most commonly referred to as the cable; the nickname dates back to the 1900’s when a Trans-Atlantic telegraph cable was used to send the value of the GBP/USD exchange rate from the United Kingdom to the United States. Other nicknames for the currency include the Pound, Pound Sterling, Sterling, and Quid. The GBP/USD is also referred to as Pound Dollar or Sterling Dollar. In most cases when a trader mentions cable or the cable, the reference is in fact to the GBP/USD.
The strongest correlation seen in the GBP/USD is with the EUR/USD because of UK’s former membership in the EU. After Brexit, it is likely that this correlation will subside.
What Factors Affect the GBP/USD?
The GBP/USD fluctuates on interest rate differentials as well as economic speculation. When the UK voted to leave the European Union, as an example, immediately investors called for a decline in the British Pound on speculation that the country would face disruptions in their economy after leaving the EU. The potential impact was clearly communicated by the Bank of England ahead of the event as the central bank promotes transparency.
Policy statements, press releases, and relevant news relating to the UK economy can be found at the official Bank of England’s website http://www.bankofengland.co.uk.
An example of the effect of interest rate differentials can be seen in the GBP/USD. Economic conditions in the United States improved following the financial crises, and in 2014, markets started speculating that the Federal Reserve would start raising interest rates, causing the US Dollar to appreciate, and causing a decline in the GBP/USD. Communication from the Federal Reserve about their interest rate intentions, as well as press releases can be found at https://www.federalreserve.gov.
When Does GBP/USD Experience Volatility?
While the highest volatility in the foreign exchange market tends to occur during the overlap between the European and North American sessions, the GBP/USD notices volatility in early European trading as well. One of the differences between the EUR/USD and GBP/USD is that the Bank of England tends to schedules their statements slightly earlier in the day, and ahead of the North American open. Economic releases pertaining to the UK are most often released early in the European session. During the Asian session, volatility tends to quiet down and ranges are commonly formed.
Who Trades the GBP/USD?
GBP/USD spreads tend to be competitive but higher than the EUR/USD, causing some scalpers and short-term traders to move away from the pair. Aside from regular market participants, European intra-day traders are drawn to the pair, and will often take a speculative position near the European open, and look to close their trade ahead of the North American open. The GBP/USD tends to offer volatility in the European session when few other pairs do, especially on days that economic releases are scheduled.