The Most Commonly Traded Currency Pairs

The most traded currency pairs in the world originate from different continents and represent some of the strongest economies. Currency trading, or forex trading, is one of the most popular forms of investment in the world, with millions of people participating on a daily basis.

Trading in the forex market can be very profitable, but it also involves a high level of risk due to the high volatility of currency prices. It is important for traders to have a good understanding of the most commonly traded currency pairs and their underlying fundamentals in order to make informed trading decisions.

In this article, we will discuss the most traded currency pairs and their importance in the global financial market.

What are currency pairs?

Currency pairs are used to determine the value of one currency in relation to another. They consist of a base currency and a quote currency. For instance, the most commonly traded currency pair in the world is the EUR/USD where its price reflects how much of the quote currency, the US dollar, is needed to buy one unit of the Euro, the base currency.

Each currency pair has a bid and ask price. The highest price a buyer is willing to pay for the currency is known as the bid price, while the lowest price a seller is willing to sell it for is referred to as the ask price. The difference between the bid and ask price is referred to as the bid-ask spread. Some forex traders prefer to trade on currency pairs with a lower or tighter spread to minimise trade costs. However, other traders choose to trade volatile currency pairs with wider spreads and lower liquidity to take advantage of price fluctuations.

Which are the most commonly traded pairs?

The most commonly traded currency pairs often involve the US dollar or euro. Apart from EUR/USD, some of the most common currency pairs are:

• USD/JPY
• GBP/USD
• USD/CHF
• USD/CAD
• AUD/USD

EUR/USD

The EUR/USD currency pair is the most traded pair in the world, accounting for over 24% of daily forex trading volume. This pair represents the euro, the currency of the European Union, against the US dollar, the world’s reserve currency. It is the most liquid currency pair in the world, with tight spreads and high trading volumes. The EUR/USD is heavily influenced by economic data releases from both the Eurozone and the US, as well as global events such as political turmoil and central bank policy.

USD/JPY

The USD/JPY currency pair is the second most traded pair in the world, accounting for around 13% of daily forex trading volume. It represents the US dollar against the Japanese yen and is heavily influenced by economic data releases from both countries. The USD/JPY is often used as a gauge for assessing global risk, with investors typically buying the yen during times of market uncertainty and selling it when markets are bullish.

The USD/JPY currency pair is also known for its high liquidity, owing to the yen’s status as the most heavily traded currency in Asia, and the US dollar’s position as the most widely traded currency worldwide.

Similar to the Fed and ECB, the Bank of Japan (BoJ) sets the interest rates for Japan’s economy which, in turn, influences the value of the yen relative to the US dollar.

GBP/USD

The GBP/USD currency pair, also known as cable, is the third most traded pair in the world. It accounts for approximately 9% of daily forex trading volume. The GBP/USD pair is popular among traders because of the volatility of the British pound which can be heavily influenced by economic data releases from both countries, as well as political events such as Brexit negotiations. The GBP/USD is also known for its high volatility, with sudden swings in price not uncommon.

USD/CHF

The USD/CHF currency pair ranks as the fourth most traded pair in the world, accounting for around 5% of daily forex trading volume. It represents the US dollar against the Swiss franc and is often used as a safe-haven currency during times of market uncertainty. The Swiss franc is known for its stability, making it a popular choice for investors seeking to hedge against market volatility.

AUD/USD

The AUD/USD currency pair is the fifth most traded pair in the world, accounting for around 5% of daily forex trading volume. It represents the Australian dollar against the US dollar and is heavily influenced by economic data releases from both countries, as well as commodity prices. Australia is a major exporter of commodities such as iron ore and gold, making the AUD/USD highly sensitive to changes in commodity prices.

AUD/USD is popular among traders because of the high-interest rates offered by the Australian dollar, which can make it attractive to carry traders.

The most traded currency pairs offer valuable insights

The top traded currency pairs in the foreign exchange market offer valuable insights into global economic trends and market sentiment.

Understanding the dynamics of these currency pairs is essential for anyone looking to participate in forex trading, as they can offer valuable insights into global economic trends and market sentiment.

While forex trading can be highly profitable, it also involves a high level of risk, and traders should always do their own research and exercise caution before making any trading decisions.

Explore the most popular forex pairs with IronFX

If you’re new to forex, it’s crucial to take the time to learn as much as you can about the forex market and how to trade. Familiarise yourself with everything about currency pairs, currency trends, and the various factors that influence currency prices. Determine your trading style that best fits your trading needs and develop a trading plan and strategy to achieve your trading goals.

If you’re interested in exploring forex trading or expanding your trading skills, sign-up with a leading broker, like IronFX, to get started. IronFX offers an extensive range of educational resources through its IronFX School and blogs.

If you’re not quite ready to start trading with real money, you can open a demo account and practise trading with virtual funds.  A demo account offers a simulated trading environment that is perfect for testing your trading plan and strategies.

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