Thread: What is a currency pair?

Prices are always indicated by currency pair. All transactions take place between two currencies and are simultaneously selling one currency and buying another currency. So when you buy EUR / USD currency pair represents the value of the euro against the U.S. dollar. One currency is bought (long position), while the other currency is sold (short position).

A currency pair always involves two different currencies issued by two different countries. Essentially, the current market value of each type of currency is cross-referenced with the other. Typically, it is the smallest unit of currency for each country that is used for the currency pair. For example, if the base currency used in the calculation is the United States dollar, the counter currency could be the Euro or the British pound. The idea is to determine how much the US dollar is worth if exchanged for a Euro or a pound.