There are some currencies that are far more popular trades than others, they are called the major forex currency pairs, and they are as follows:
The majors: GBP/USD, EUR/USD, USD/CHF, USD/JPY
The commodity pairs: AUD/USD, USD/CAD, NZD/USD
- GBP/USD – The GBP/USD (Pound Sterling/US Dollar) is nicknamed ‘Cable’ due to the undersea cables that used to carry bid and ask quotes across the Atlantic Ocean. This major forex pair shares similarities with the EUR/USD. Both are highly correlated because the United Kingdom’s economy is tied to the European Union. Traders enjoy tight bid-ask spreads on the GBP/USD due to its high liquidity.
- EUR/USD – The EUR/USD (Euro/US Dollar) nicknamed ‘Fiber’ is the world’s most traded currency pair commanding 23% of FX transactions in 2016. The Euro and the US Dollar represent the two largest economies in the world, the US Economy and the European Union. The popularity of the EUR/USD ensures that it trades at tight spreads. High volumes lead to reduced price differences between the bid and offer.
- USD/CHF – The USD/CHF (US Dollar/Swiss Franc), nicknamed ‘Swissy’, derives its popularity from the Swiss Franc’s safe-haven status. When risk/volatility enters the market, traders bid up the Swiss Franc because the Swiss economy is seen to have lower risk.
- USD/JPY – The USD/JPY (US Dollar/Japanese Yen) is also known as ‘The Ninja’ and is the second most traded currency pair. The Bank of Japan has had to combat low inflation and growth for many years, and as a result it has a very low interest rate. The USD/JPY is also traded in extremely high volumes which lead to low bid-ask spreads and lots of liquidity. The Yen is also known as a safe-haven currency amongst traders.