How currency pairs work
EUR/USD, for example, expresses how many U.S. dollars are required to buy one euro. The first currency is the base currency; the second is the quote currency.
Major drivers
- Relative interest-rate expectations.
- Inflation and employment data.
- Central-bank guidance.
- Risk sentiment and capital flows.
- Political and geopolitical events.
Trading sessions
Liquidity changes across Asian, European and U.S. sessions. Overlap periods can produce more activity, while quieter sessions may show smaller ranges in some pairs.
Risks
FX is often leveraged. Small percentage moves can therefore create large account-level changes. Spread, slippage, swap and broker execution can materially affect results.