What is the 'GBP/USD (British Pound/U.S. Dollar) '
The GBP/USD (British Pound/U.S. Dollar) is the abbreviation for the British pound and U.S. dollar (GBP/USD) currency pair or cross. The currency pair tells the reader how many U.S. dollars (the quote currency) are needed to purchase one British pound (the base currency).
Trading the GBP/USD currency pair is also known as trading the "Cable".
BREAKING DOWN 'GBP/USD (British Pound/U.S. Dollar) '
The value of the GBP/USD pair is quoted as 1 British pound per X U.S. dollars. For example, if the pair is trading at 1.50 it means that it takes 1.5 U.S. dollar to buy 1 British pound.
The GBP/USD is affected by factors that influence the value of the British pound and/or the U.S. dollar in relation to each other and other currencies. For this reason, the interest rate differential between the Bank of England (BoE) and the Federal Reserve (Fed) will affect the value of these currencies when compared to each other. When the Fed intervenes in open market activities to make the U.S. dollar stronger, for example, the value of the GBP/USD cross could decline, due to a strengthening of the U.S. dollar when compared to the British pound.
The GBP/USD tends to have a negative correlation with the USD/CHF and a positive correlation to the EURO/USD currency pairs. This is due to the positive correlation of the euro, Swiss franc and the British pound.