The GBP/USD ( British Pound/U.S. Dollar ) is an abbreviation for the British pound and U.S. dollar 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."
Basics of the 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. dollars to buy 1 British pound.
The GBP/USD is among the top five most-widely traded currency pairs in the world. It 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 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.