One of the most important contributors to their respective economies, as well as to the international market is the GBP/USD currency duo. The GBP/USD currency trading pair is included in “The Majors”, which is a group of widely-traded currency pairs. In fact, Q8 Trade lists it as one of the most traded currency pairs on its platform. It is traded in high volume, experiencing rapid price changes as the pair is traded at very high numbers per second.
For a long time now, the US dollar is used as the currency unit in all manners of trading across the globe. It plays a significant role in driving the world economy, and continues to influence international trading across primary industries such as technology, manufacturing and pharmaceuticals, to name a few.
The UK has been a strong economic influence across the EU region, with a rich history reaching a wide financial clout in terms of manufacturing and productions since the expansion of the British Empire. Furthermore, it has grown to be an important figure in the modern times, adding to its roster a significant number of economic contributions with its key industries focusing on financial services and industrial products.
The Great British Pound and the U.S. Dollar trading pair is colloquially named the “cable”, which took after the first foreign exchange between currencies done using a telegraph. The name stuck until today, the only difference is that information is transmitted via satellites using fiber optic cables.
The Benefits: Why Trade in the GBP/USD Currency Pair with a CFD broker?
Novice traders who want to trade in the Forex market may try the GBP/USD pair. Of the major currencies in the world, the GBP/USD is the least volatile pair.
Sufficient Liquidity. This is a solid currency pair as it offers sufficient liquidity. There are always a good number of traders willing to perform an exchange with the GBP/USD. There is sufficient price movement, giving more opportunities to make profits for the forex trader.
Knowledge of Exact Profits on In-The-Money Trades. Both countries have experienced the global economic crisis in recent years, and have been exposed to constant fluctuations in market prices. From a trader’s perspective, it is much easier to invest online rather than engaging in a direct currency exchange in the Forex market. Investors are able to predict the price of the trading pair using a variety of strategies, having known the amount of profits outright before a trade ends.
Exposure to Top Global Economies. Trading on the value of the GBP/USD currency pair gives the opportunity to trade on the top two leading economies, the UK and the US. These two are the largest financial markets in the world which makes it the best venue to apply your very own trading strategies and come out with more profits.
Strategies on Trading the GBP/USD Currency
Trading in a currency pair via this form of derivative is taking a view on how one currency behaves in relation to another currency. For the currency pair GBP/USD, the base currency is the pound Sterling and the counter currency is the US dollar.
Great Britain is a member-state of the European Union (EU) and economic changes in the region directly influences the British pound. Investors who speculate that the British pound will be stronger than the dollar at the end of a contract expiry may choose the Sell contract. Similarly, if a trader predicts that the Pound will weaken against the Dollar, a Buy contract is placed.
Fundamental and Technical analyses are also important strategies to take note of when trading with the GBP/USD currency pair. Of the factors relevant in fundamental analysis, the release of the UK Inflation Letter from the Bank of England is the most specific to this trading pair. It is a quarterly report on the state of inflation in the UK and projects how this may affect the UK economy. Knowing this beforehand gives a trader time to plan out how he can effectively execute a trading strategy.
A monthly release of UK’s Manufacturing Data influences how the GBP/USD currency pair is traded in the market. It is always a good decision to wait for the release of this market data before executing any Buy or Sell contracts.