Major and Minor Pairs
How the world's most traded currency pairs are structured, what moves them, and what distinguishes major pairs from minor and exotic pairs.
What Makes a Currency Pair "Major"
Major currency pairs all include the US dollar as either the base or quote currency. They are considered major because of their high trading volume, tight spreads, and the economic weight of the countries involved. The US dollar is involved in the majority of all global forex transactions, making it the central reference point for currency valuation.
Minor pairs (also called cross pairs) do not include the US dollar. They pair two other major currencies against each other. EUR/GBP, EUR/JPY, and GBP/JPY are examples. These pairs still carry significant trading volume but typically have slightly wider spreads than the major pairs.
Exotic pairs involve one major currency and one from a smaller or emerging economy: USD/TRY, EUR/ZAR, GBP/SGD. These pairs tend to have lower liquidity, wider spreads, and can be more sensitive to political developments in the smaller economy.
Seven Major Currency Pairs
These pairs account for a large portion of global forex trading volume. Each has distinct characteristics shaped by the economies they represent.
EUR/USD
Euro vs US Dollar. The most widely traded pair globally. Influenced primarily by European Central Bank and Federal Reserve policy, US economic data, and the relative health of the Eurozone economy. Typically most active during the London and New York sessions.
GBP/USD
British Pound vs US Dollar. Known as "Cable" in trading parlance. Sensitive to Bank of England decisions, UK inflation and employment data, and any developments related to UK trade policy. Can be more volatile than EUR/USD during major UK data releases.
USD/JPY
US Dollar vs Japanese Yen. The yen is considered a safe-haven currency, meaning it often strengthens during periods of global uncertainty. Bank of Japan monetary policy, particularly around interest rates, is a key driver. Most active during the Tokyo and New York sessions.
USD/CHF
US Dollar vs Swiss Franc. The Swiss franc, like the yen, is considered a safe-haven currency. The Swiss National Bank's monetary policy and Switzerland's trade relationships influence the pair. Often moves inversely to EUR/USD due to the close economic ties between Switzerland and the Eurozone.
AUD/USD
Australian Dollar vs US Dollar. Known as the "Aussie." The Australian dollar is closely linked to commodity prices, particularly iron ore and other raw materials. China's economic health is a significant indirect driver, as China is Australia's largest trading partner.
NZD/USD
New Zealand Dollar vs US Dollar. Known as the "Kiwi." Similar to the Aussie in its commodity-linked characteristics. New Zealand's dairy exports and Reserve Bank of New Zealand interest rate decisions are key drivers. Often moves in correlation with AUD/USD.
USD/CAD
US Dollar vs Canadian Dollar. Known as the "Loonie." Canada's close economic relationship with the United States means US economic data significantly affects this pair. Oil prices are another major driver, as Canada is a major oil exporter and the Canadian dollar often tracks crude oil prices.
Minor Pairs: Currency Crosses
Currency crosses are pairs that do not include the US dollar. They are derived mathematically from the major pairs. EUR/GBP, for instance, reflects the relative value of the euro against the pound sterling, which can be derived from EUR/USD and GBP/USD.
Cross pairs are useful when a trader has a view on two non-dollar currencies relative to each other. If you believe the euro will strengthen against the pound regardless of what the dollar does, EUR/GBP lets you express that view without dollar exposure.
How to Read a Currency Pair Quote
A forex quote always shows two prices: the bid and the ask. The bid is the price at which the market will buy the base currency from you (the price you sell at). The ask is the price at which the market will sell the base currency to you (the price you buy at). The difference between these two prices is the spread, which represents the cost of the transaction.
In the example above, EUR/USD is quoted at 1.0847/1.0849. The spread is 2 pips. If you buy EUR/USD at 1.0849, the price needs to move at least 2 pips in your favour before you break even. This is why understanding spreads is an important part of evaluating the cost of any forex trade.