Many currencies are used in global trade, but only a few are actively traded in the forex market. Only the most economically/politically stable and liquid currencies are demanded reasonably in currency trading. The American dollar, for example, is the world’s most actively traded currency due to the size and strength of the US economy.
In this article, I will tell you what currency pairs are the most liquid forex pairs in the forex market.
Currency pairs are two nations’ national currencies that are coupled for trading on the foreign exchange (FX) marketplace. Both currencies have exchange rates that serve as the basis for trade’s position. All forex trading, whether selling, buying, or trading, takes place through currency pairs.
A currency pair, in other terms, is a quotation for two separate currencies. It is the amount you would pay in one currency for one unit of another currency. For example, if a trader gets quoted EUR/USD 1.13, it means that the trader may exchange one Euro for 1.13 US dollars.
When the value of one currency changes, the value of another currency changes as well. If the EUR/USD quotation goes from 1.13 today to 1.15 tomorrow. In that case, it means that the Euro has appreciated relative to the US dollar or that the US dollar has depreciated relative to the Euro since it will cost more US dollars to purchase one Euro.
In general, the eight most traded currencies are the US dollar (USD), Euro (EUR), Canadian dollar (CAD), Japanese yen (JPY), British pound (GBP), Australian dollar (AUD), Swiss franc (CHF), and Chinese Yuan (in no specific order) (CNY).
Almost any currency can be traded; however, some currencies pair up more frequently than others. The USD is present in all of the major currency pairs. There are several major currency pairs in the forex market worldwide.
Currency pairs that do not trade against the US dollar are referred to as cross-currency pairs. The Euro and the Japanese yen are two popular cross-currency pairs.
Before listing the most liquid forex pairs, I would say not to confuse them with the most volatile forex pairs, which are entirely a different arena yet has a very small overlapping factor.
Below mentioned are the most liquid forex pairs:
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The currency pair EUR/USD refers to the Euro versus the US dollar pair, or cross, between the currencies of the European Union (EU) and the United States (USD). The currency pair shows how many US dollars (the quotation currency) are needed to purchase one Euro (the base currency).
Trading the EUR/USD currency pair is often known as trading the “euro.” The EUR/USD currency pair is quoted by 1 euro for x US dollars. For example, if the pair is trading at 1.50, that means that it takes 1.5 US dollars to buy one Euro.
Because it represents a combination of two of the world’s biggest economies, the EUR/USD pair has become the most widely traded pair in the world. It is affected by factors that affect the value of the Euro and/or the US dollar compared to other currencies.
The interest rate differential between the European Central Bank (ECB) and the Federal Reserve (Fed) affects the value of these currencies when compared to one another.
For example, if the Fed intervenes in open market activities to boost the US dollar, the value of the EUR/USD cross may fall as the US dollar strengthens against the Euro. Similarly, bad news from the EU economy has a negative impact on the EUR/USD pair.
The news of Italy’s and Greece’s government financial problems and immigrant influx resulted in a euro selloff, prompting the pair’s exchange rate to plunge.
The currency exchange rate between the US dollar and Japanese yen is indicated by the abbreviation USD/JPY. The currency pair indicates the number of Japanese yen (the quotation currency) needed to purchase one US dollar (the base currency). The currency sign for the Japanese yen is.
The USD/JPY pair’s value is quoted in Japanese yen for one US dollar. For instance, if the pair is trading at 150, one US dollar may be swapped for 150 yen. Due to Japan’s status as the world’s third largest national economy and a major exporter, USD/JPY is one of the world’s most liquid and heavily traded currency pairs.
The USD/JPY exchange rate is affected by factors that influence the value of the US dollar and the Japanese yen relative to one another.
The difference in interest rates between the Federal Reserve and the Bank of Japan (BoJ) has a significant impact on the USD/JPY exchange rate. Higher interest rates make a currency more attractive because they allow owners of assets denominated in that currency to receive a higher yield.
For example, if the federal funds rate rose from near zero to 2% while the BOJ’s policy rate remained around zero, the dollar would likely rise versus the yen since investors could now earn a considerably higher yield on dollar-denominated money markets.
In reality, the yen reached its lowest level versus the dollar in twenty-four years at the midpoint of 2022, when the Bank of Japan refused to follow other central banks in raising interest rates. Japan’s central bank and government continue to consider deflation, which has gripped the nation for decades, as a greater danger than short-term inflation caused by higher oil prices.
British Pound/US Dollar (GBP/USD) is an abbreviation for the currency pair or cross between the British pound and the US dollar. The currency pair informs the reader of the amount of US dollars (the quotation currency) needed to purchase one British pound (the base currency).
GBP/USD is the third-most-traded trading pair, accounting for around 11% of the total forex market. Trading the GBP/USD currency pair is called “Cable trading.”
The value of the GBP/USD pair is quoted as 1 British pound for x United States dollars. For instance, if the pair is trading at 1.50, it indicates that 1.5 US dollars are required to purchase 1 British pound.
GBP/USD is one of the world’s five most widely traded currency pairs. It is affected by factors that influence the value of the British pound and/or the US dollar in relation to other currencies. Therefore, the difference in interest rates between the Bank of England (BoE) and the Federal Reserve will affect the relative value of these two currencies.
When the Federal Reserve intervenes in open market activities to strengthen the US dollar, for instance, the value of the GBP/USD cross may decline due to the strengthening of the US dollar relative to the British pound.
The USD/CHF currency pair represents the US dollar and Swiss franc. The currency pair indicates the number of Swiss francs (the quotation currency) needed to purchase one US dollar (the base currency). Trading the USD/CHF currency pair is sometimes called ” Swissie. “
The currency code for the Swiss franc is CHF, whereas the currency code for the US dollar is USD. The quotation of currencies in pairs reveals the amount of one currency quoted to buy another.
The value of the USD/CHF is the number of francs required to purchase one dollar. For example, if the pair is trading at 1.05, it takes 1.05 Swiss francs to buy one US dollar. If the exchange rate is 0.9850, one US dollar will cost 0.9850 Swiss francs.
The USD/CHF exchange rate is affected by factors that influence the value of the US dollar or Swiss franc in relation to other currencies. Both countries’ employment statistics and gross domestic product (GDP) are two economic indicators that substantially influence the currency pair.
The Federal Reserve (Fed) and the Swiss National Bank (SNB) interest rate differential will also affect this currency pair. For instance, when the Fed intervenes in open market operations to strengthen the US dollar, the USD/CHF exchange rate might rise due to the strengthening of the US dollar relative to the Swiss franc.
On the other side, an increase in interest rates by the Swiss National Bank may attract more investors to the franc, so increasing its value. In this scenario, the USD/CHF exchange rate would decline since fewer Swiss francs are required to purchase one US dollar.
The USD/CHF negatively correlates with the currency pairs of EUR/USD and GBP/USD. Due to the strong connection between the Euro, Swiss franc, and British pound, this is the case.
A currency pair indicates the amount of one currency required to buy one unit of another currency. The Australian dollar (abbreviated AUD) is the base currency in this quote. In contrast, the US Dollar (abbreviated USD) is the quoted currency or the currency in which the price is quoted.
In 1983, the AUD became a freely floating currency. Various geological, geographical, and government policies have contributed to its popularity among traders. Australia is one of the world’s richest countries in terms of its natural resources, which include metals, coal, diamonds, meat, and wool.
The AUD/USD abbreviation designates a rate-price quote in which Australian Dollars can be exchanged for US Dollars. The quoted value of the AUD/USD pair is 1 Australian dollar for the specified number of United States dollars. For instance, if the pair is trading at 0.75, it indicates that 0.75 US dollars are required to purchase 1 Australian dollar.
The AUD/USD is one of the world’s most actively traded currency pairs. Trading the AUD/USD is colloquially referred to as trading the “Aussie.” So, you would hear a trader remark, “We purchased the Australian dollar at 7495, and it surged 105 pips to 7600.”What is an EA - Can Expert advisors be profitable? — 2023
The AUD/USD exchange rate is affected by factors that influence the value of the Australian dollar and the US dollar in relation to each other and other currencies. This includes geographical factors such as the production of commodities (coal, iron ore, and copper) in Australia, political factors such as the business environment in China (a major customer of Australian commodities), and interest rate influences.
USD/CAD is the abbreviation for the currency pair consisting of the US dollar and the Canadian dollar. The USD/CAD quote informs the reader of the number of Canadian dollars (the quote currency) required to purchase one US dollar (the base currency).
Trading the USD/CAD currency pair is frequently referred to as trading the “loonie,” which is the name for the Canadian dollar coin depicting a loon. The USD/CAD is also one of the most actively traded and liquid forex pairs on the foreign exchange market.
The USD/CAD pair’s value is quoted as 1 US dollar for x Canadian dollars. For instance, if the pair is trading at 1.20, it indicates that it costs 1.2 Canadian dollars to purchase 1 US dollar or that 1 CAD is equivalent to $0.833 USD.
Although the USD/CAD currency pair has approached parity (i.e., 1:1) at various times in history, the US dollar has historically been the stronger of the two.
The USD/CAD currency pair is actively traded due to the substantial economic links between the two countries.
NZD/USD is the currency pair abbreviation for the New Zealand dollar and US dollar. A price quotation for this currency pair indicates the number of US dollars required to acquire one New Zealand dollar.
The quoted value of the NZD/USD currency pair is 1 New Zealand dollar for a variable number of US dollars. For example, if the pair is trading at 1.50, that means that it takes 1.5 US dollars to buy one New Zealand dollar.
Agriculture is a major contributor to the New Zealand economy, accounting for more than two-thirds of exports. The price of dairy products is a factor that affects the NZD. New Zealand is the biggest exporter of whole milk powder in the world.
Consequently, if milk prices rise, the New Zealand economy is expected to strengthen, and traders may value the currency accordingly. Tourism is another pillar of the New Zealand economy; therefore, the economy is projected to strengthen, and the currency may gain if visits to New Zealand become less expensive.
Although New Zealand is one of the rare countries whose agriculture industry is totally exposed to the world economy (no subsidies or tariffs), the NZD/USD pair may be traded for a variety of financial reasons, various to the local economy or the products it produces.
New Zealand markets are the first to begin a new trading day, and banks and traders may sometimes take advantage of this to position trades in anticipation of upcoming events.
Additionally, the NZD/USD is affected by factors that influence the value of the New Zealand dollar and the US dollar in relation to each other and other currencies. The difference in interest rates between the Reserve Bank of New Zealand and the US Federal Reserve (Fed) will affect the relative value of these currencies.
When the Fed intervenes in open market activities to strengthen the US dollar, for instance, the value of the NZD/USD cross may decline due to a strengthening of the US dollar relative to the New Zealand dollar.
The New Zealand dollar is considered a carry trade currency since it is a currency with a reasonably high yield. Consequently, investors frequently purchase the NZD using a currency with a lower yield, such as the Japanese yen or the Swiss franc.
The NZD/USD positively correlates with its adjacent currency, the Australian dollar (AUD/USD).
The EUR/GBP currency pair represents the price between the Euro and the British pound. The primary purpose of the EUR/GBP quotation is to convert euros to pounds sterling. For example, if the EUR/GBP exchange price is 0.85, it means that €1 is equivalent to £0.85 or that £0.85 is equivalent to €1.
The EUR/GBP currency pair belongs to the category of Minor Forex Pairs. The EUR/GBP currency pair is of special interest to European and British Forex traders, and this is even true now that the Brexit decision has had such a significant influence on both currencies.
Numerous factors, including central bank interest rates, press conferences, unemployment data, trade balances, inflation, GDP growth, sales data, market sentiment, and consumer confidence, impact the EUR/GBP exchange price.
While all of them impact price, the issue that traders focus on the most is the interest rates of central banks.
The appreciation or depreciation of the currency is mostly determined by the interest rates set by central banks. A high-interest rate will often result in a currency’s appreciation. However, when interest rates are cut, a currency’s value will often decline.
EUR/JPY is the ticker sign for the Euro and Japanese yen exchange rate. Combining the popular EUR with the volatile JPY, the EUR/JPY has become a popular currency pair among forex traders. The pair is also known as “Euppy,” pronounced “Yuppy,” and is the seventh most traded asset on the forex market as of October 2019.
The EUR JPY cross pair is classified as a ‘minor’ currency pair on the foreign exchange market. The EUR is the base currency, and the JPY is the quoted currency in the EUR-JPY foreign exchange rate. This means that the EUR-JPY exchange price represents the number of Japanese yen required to take one Euro at any particular time.
The EURJPY pair has always exhibited adequate volatility over most trading sessions. This guarantees that traders might locate different trading opportunities when trading the pair. The spreads on the majority of Japanese crosses are often comparatively higher. But the EUR/JPY pair is always available at competitively low spreads, which reduces your overall trading expenses.
The EUR/JPY exchange rate is a leading indicator for global stocks. The link has always been successful, with the pair rising when stock prices are heading higher, and risk is growing. The EUR/JPY will often decline in a risk-averse environment, indicating falling stock prices.
The Japanese yen is most influenced by the Bank of Japan (BOJ). Keep an eye on the monthly interest rate announcement and its impact on the bound market. In recent years, Japan has conducted the world’s most aggressive quantitative easing programme, resulting in a lower yen.
The European Central Bank (ECB) also publishes monthly interest rates and rate statements. In addition to being an active market participant, the ECB has also conducted periodic Quantitative Easing when the Eurozone has shown symptoms of an economic downturn.
Additionally, the ECB makes major choices regarding individual member states, such as borrowing or strategic stimulus packages, which may affect the Euro and, subsequently, the EURJPY exchange rate.
Japan is susceptible to natural disasters that can devastate major economic sectors. Earthquake Early Warning (EEW) system strong quake alerts can exert downward pressure on the JPY; hence it is wise to monitor them closely.
The EUR/CHF currency pair is one of the most popular ‘cross-currency’ pairs. This means that both currencies are exchanged directly for one another.
The EUR/CHF currency pair is reported to exhibit a significant resemblance to the USD/CHF currency pair, colloquially known as the ‘Dollar Swissy’ in the industry. Contrary to popular assumption, Switzerland is not a member of the European Union (EU).
The Swiss National Bank sets Switzerland’s interest rates independently from the European Central Bank (ECB). Nonetheless, the EU and Switzerland are physically and historically intertwined as long-standing trading partners.
Economic and geopolitical conditions are the primary drivers of the EUR/CHF forex pair. From an economic perspective, the European Central Bank (ECB) determines Euro interest rates, whereas the Swiss National Bank determines Swiss Franc interest rates.
Instability in the EU’s economy might lead the Swiss Franc to appreciate versus the Euro and vice versa.
Similarly, political unpredictability in the EU might cause investors to seek refuge in the Swiss Franc. It has occurred frequently in recent years, as seen by the sovereign debt crisis in Greece and the recent Brexit discussions.
Knowing about the most liquid forex pairs doesn’t make you smart enough to trade forex immediately. Instead, you need to invest time in learning the anatomy of volatility and the nature of each currency pair. I recommend you to command on just a few currency pairs (not more than 3) and then pile up your level of education as you think you can digest more.
EUR/USD is the market’s most actively traded currency pair, accounting for 24.0% of daily forex trades in 2019. The EUR/USD pair is popular because it represents the world’s two largest economies: the European single market and the United States.