Currency pair

A widely traded currency pair is the relation of the euro against the US dollar, designated as EUR/USD.

As mentioned previously, the quotation EUR/USD 1.2500 (or EURUSD 1.2500) means that one euro is exchanged for 1.2500 US dollars.

On the other hand, if the EUR/USD (or EURUSD) quote changes from 1.2500 to 1.2490 the euro has become relatively weaker than the dollar.

From its inception in 1999 and as stipulated by the European Central Bank, the euro has first precedence as a base currency.

For example, a British bank may use GBP as a base currency for accounting, because all profits and losses are converted to sterling.

If a EUR/USD position is closed out with a profit in USD by a British bank, then the rate-to-base will be expressed as a GBP/USD rate.

[6] In everyday foreign exchange market trading and news reporting, the currency pairs are often referred to by nicknames rather than their symbolic nomenclature.

The following nicknames are common: "Swissy" or "Euro-Swissy" for EUR/CHF, Fiber for EUR/USD, Chunnel for EUR/GBP, Loonie and The Funds for USD/CAD, Aussie for AUD/USD, Gopher for USD/JPY, Guppy for GBP/JPY, Yuppy for EUR/JPY pairing.

New innovations include Barney for USD/RUB and Betty for EUR/RUB after the fictional characters the Rubbles in The Flintstones.

These pairs involve a major currency - like USD, EUR, GBP, or the JPY - alongside a thinly-traded currency that holds minimal trading volume within the foreign exchange market.

Since trading volume is less present within these pairs, there is a lack of market depth, leading to wider spreads.

Brokerages typically increase the spread they receive from their market providers as compensation for their service to the end customer, rather than charge a transaction fee.