Forex (the foreign exchange market) is the world’s largest financial market, with daily currency exchanges totalling more than $5 trillion.
The most traded Forex major currency pairs involve the US dollar, euro, Japanese yen, British pound and Australian dollar.
These currencies are considered “major” because they are the most used in trade and finance worldwide. They also tend to be traded at high volumes and have tight spreads.
EUR/USD
EUR/USD – a currency pair of the Euro and the United States dollar – is one of the most traded pairs in the Forex market. It belongs to the group of ‘Majors’, a group that consists of the world’s most widely traded pairs.
EUR/USD has many features that make it a great option for both novice and experienced traders. These include its low spreads, high liquidity and its ability to accommodate various trading approaches.
Important economic and political events from both the US and Europe affect the price of this pair. It is important to keep up with news from the EU and the US, as well as major ECB and Fed speeches.
USD/JPY
The USD/JPY currency pair is one of the most liquid and heavily traded pairs in the world. This is largely due to Japan’s status as the world’s third largest economy and a major exporter.
There are several factors that influence the value of the US dollar and Japanese yen, including interest rate differentials. When the Fed and Bank of Japan hike interest rates, this can increase demand for higher-yielding currencies like the yen.
In addition to interest rate differences, the USD/JPY also tends to be influenced by correlations with U.S. Treasuries. When yields on Treasury bonds, notes, and bills rise, the yen tends to weaken relative to the dollar.
GBP/USD
GBP/USD, also known as the cable, is one of the most traded Forex major currency pairs. The currency pair is the basis for transactions between the UK and US.
This pair is heavily influenced by the policies of central banks in both countries on inflation and interest rates. The Bank of England (BoE) and the Federal Reserve (Fed) make decisions eight times a year that can change the value of the GBP/USD pair.
News releases that affect the value of the British pound to US dollar exchange rate include GDP reports, employment reports and inflation. In addition, announcements of interest rates from both the BoE and the Fed can have a dramatic impact on prices.
USD/CAD
The USD/CAD forex pair is one of the major currency pairs in the Forex market. Its huge daily trade volumes, tight spreads and high liquidity make it a popular trading option.
Its price is largely influenced by crude oil prices, as Canada is one of the world’s largest exporters of this commodity. Its value increases when oil prices rise, while it decreases when they fall.
The CAD is also influenced by economic data, including the Trade Account Balance. This value is a measure of the balance between exports and imports of total goods and services in a country. If there is a growth in the trade surplus, it will have a positive impact on the CAD exchange rate.
AUD/USD
The AUD/USD pair is one of the most popular Forex major currency pairs. Its value is influenced by various factors, such as Australian and US interest rates and the global commodity market.
Australia is a major exporter of minerals, such as iron ore and coal. This is why the Australian dollar often rises and falls along with commodity prices.
The Australian dollar is also influenced by the policies of its central bank, the Reserve Bank of Australia (RBA). A hawkish-biased statement from the RBA will boost the value of the currency, while a dovish-biased one will cause it to fall.
NZD/USD
NZD/USD, or the New Zealand Dollar, is one of the Forex major currency pairs. It is the 10th most traded pair and it is known as ‘The Kiwi’ because it depicts a kiwi bird on its $1 coin.
The NZD is a commodity currency and it depends on the price of global commodities such as agriculture and dairy, with tourism also an important driver for the economy. It also relies on interest rate differentials, which make it a popular carry trade currency.