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Trading the GBP/USD Currency Pair – A Beginner’s Guide

Michael Fasogbon

Updated:
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The British pound/U.S. dollar currency pair denotes the exchange rate between the British pound and the U.S. dollar. The pair expresses the relationship as the number of dollars needed to buy one pound.

For example, if the GBP/USD exchange rate is 1.30000, it means you need $1.30 to buy one pound. In this pair, the pound is the base currency, and the U.S. dollar is the quote currency.

 

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4 Providers that match your filters

Payment methods

Trading platforms

Regulated by

Support

Min.Deposit

$ 1

Leverage max

1

Currency Pairs

1+

Classification

1or more

Mobile App

1or more
Recommended

Rating

Total cost

$ 0 Commission 3.5

Mobile App
10/10

Min.Deposit

$100

Spread min.

Variables pips

Leverage max

100

Currency Pairs

40

Trading platforms

Demo
Webtrader
Mt4
MT5

Funding Methods

Bank Transfer Credit Card Giropay Neteller Paypal Sepa Transfer Skrill

Regulated by

FCA

What you can trade

Forex

Indices

Actions

Cryptocurrencies

Raw Materials

Average spread

EUR/GBP

-

EUR/USD

-

EUR/JPY

0.3

EUR/CHF

0.2

GBP/USD

0.0

GBP/JPY

0.1

GBP/CHF

0.3

USD/JPY

0.0

USD/CHF

0.2

CHF/JPY

0.3

Additional Fee

Continuous rate

Variables

Conversión

Variables pips

Regulation

Yes

FCA

No

CYSEC

No

ASIC

No

CFTC

No

NFA

No

BAFIN

No

CMA

No

SCB

No

DFSA

No

CBFSAI

No

BVIFSC

No

FSCA

No

FSA

No

FFAJ

No

ADGM

No

FRSA

71% of retail investor accounts lose money when trading CFDs with this provider.

Rating

Total cost

$ 0 Commission 0

Mobile App
10/10

Min.Deposit

$100

Spread min.

- pips

Leverage max

400

Currency Pairs

50

Trading platforms

Demo
Webtrader
Mt4
MT5
Avasocial
Ava Options

Funding Methods

Bank Transfer Credit Card Neteller Skrill

Regulated by

CYSECASICCBFSAIBVIFSCFSCAFSAFFAJADGMFRSA

What you can trade

Forex

Indices

Actions

Cryptocurrencies

Raw Materials

Etfs

Average spread

EUR/GBP

1

EUR/USD

0.9

EUR/JPY

1

EUR/CHF

1

GBP/USD

1

GBP/JPY

1

GBP/CHF

1

USD/JPY

1

USD/CHF

1

CHF/JPY

1

Additional Fee

Continuous rate

-

Conversión

- pips

Regulation

No

FCA

Yes

CYSEC

Yes

ASIC

No

CFTC

No

NFA

No

BAFIN

No

CMA

No

SCB

No

DFSA

Yes

CBFSAI

Yes

BVIFSC

Yes

FSCA

Yes

FSA

Yes

FFAJ

Yes

ADGM

Yes

FRSA

71% of retail investor accounts lose money when trading CFDs with this provider.

Rating

Total cost

$ 0 Commission 6.00

Mobile App
7/10

Min.Deposit

$10

Spread min.

- pips

Leverage max

10

Currency Pairs

60

Trading platforms

Demo
Webtrader
Mt4

Funding Methods

Credit Card

What you can trade

Forex

Indices

Cryptocurrencies

Average spread

EUR/GBP

1

EUR/USD

1

EUR/JPY

1

EUR/CHF

1

GBP/USD

1

GBP/JPY

1

GBP/CHF

1

USD/JPY

1

USD/CHF

1

CHF/JPY

1

Additional Fee

Continuous rate

-

Conversión

- pips

Regulation

No

FCA

No

CYSEC

No

ASIC

No

CFTC

No

NFA

No

BAFIN

No

CMA

No

SCB

No

DFSA

No

CBFSAI

No

BVIFSC

No

FSCA

No

FSA

No

FFAJ

No

ADGM

No

FRSA

Your capital is at risk.

Rating

Total cost

$ 0 Commission 0.1

Mobile App
10/10

Min.Deposit

$50

Spread min.

- pips

Leverage max

500

Currency Pairs

40

Trading platforms

Demo
Webtrader
Mt4
STP/DMA
MT5

Funding Methods

Bank Transfer Credit Card Neteller Skrill

What you can trade

Forex

Indices

Actions

Raw Materials

Average spread

EUR/GBP

-

EUR/USD

-

EUR/JPY

-

EUR/CHF

-

GBP/USD

-

GBP/JPY

-

GBP/CHF

-

USD/JPY

-

USD/CHF

-

CHF/JPY

-

Additional Fee

Continuous rate

-

Conversión

- pips

Regulation

No

FCA

No

CYSEC

No

ASIC

No

CFTC

No

NFA

No

BAFIN

No

CMA

No

SCB

No

DFSA

No

CBFSAI

No

BVIFSC

No

FSCA

No

FSA

No

FFAJ

No

ADGM

No

FRSA

71% of retail investor accounts lose money when trading CFDs with this provider.

 

With an impressive daily turnover of about $470 billion, the GBP/USD is the third most liquid currency pair in the world. The total daily turnover in the forex market is approximately $5.1 trillion, which means the GBP/USD represents about 9.2 percent of this colossal amount.

Sort By

4 Providers that match your filters

Payment methods

Trading platforms

Regulated by

Support

Min.Deposit

$ 1

Leverage max

1

Currency Pairs

1+

Classification

1or more

Mobile App

1or more
Recommended

Rating

Total cost

$ 0 Commission 3.5

Mobile App
10/10

Min.Deposit

$100

Spread min.

Variables pips

Leverage max

100

Currency Pairs

40

Trading platforms

Demo
Webtrader
Mt4
MT5

Funding Methods

Bank Transfer Credit Card Giropay Neteller Paypal Sepa Transfer Skrill

Regulated by

FCA

What you can trade

Forex

Indices

Actions

Cryptocurrencies

Raw Materials

Average spread

EUR/GBP

-

EUR/USD

-

EUR/JPY

0.3

EUR/CHF

0.2

GBP/USD

0.0

GBP/JPY

0.1

GBP/CHF

0.3

USD/JPY

0.0

USD/CHF

0.2

CHF/JPY

0.3

Additional Fee

Continuous rate

Variables

Conversión

Variables pips

Regulation

Yes

FCA

No

CYSEC

No

ASIC

No

CFTC

No

NFA

No

BAFIN

No

CMA

No

SCB

No

DFSA

No

CBFSAI

No

BVIFSC

No

FSCA

No

FSA

No

FFAJ

No

ADGM

No

FRSA

71% of retail investor accounts lose money when trading CFDs with this provider.

Rating

Total cost

$ 0 Commission 0

Mobile App
10/10

Min.Deposit

$100

Spread min.

- pips

Leverage max

400

Currency Pairs

50

Trading platforms

Demo
Webtrader
Mt4
MT5
Avasocial
Ava Options

Funding Methods

Bank Transfer Credit Card Neteller Skrill

Regulated by

CYSECASICCBFSAIBVIFSCFSCAFSAFFAJADGMFRSA

What you can trade

Forex

Indices

Actions

Cryptocurrencies

Raw Materials

Etfs

Average spread

EUR/GBP

1

EUR/USD

0.9

EUR/JPY

1

EUR/CHF

1

GBP/USD

1

GBP/JPY

1

GBP/CHF

1

USD/JPY

1

USD/CHF

1

CHF/JPY

1

Additional Fee

Continuous rate

-

Conversión

- pips

Regulation

No

FCA

Yes

CYSEC

Yes

ASIC

No

CFTC

No

NFA

No

BAFIN

No

CMA

No

SCB

No

DFSA

Yes

CBFSAI

Yes

BVIFSC

Yes

FSCA

Yes

FSA

Yes

FFAJ

Yes

ADGM

Yes

FRSA

71% of retail investor accounts lose money when trading CFDs with this provider.

Rating

Total cost

$ 0 Commission 6.00

Mobile App
7/10

Min.Deposit

$10

Spread min.

- pips

Leverage max

10

Currency Pairs

60

Trading platforms

Demo
Webtrader
Mt4

Funding Methods

Credit Card

What you can trade

Forex

Indices

Cryptocurrencies

Average spread

EUR/GBP

1

EUR/USD

1

EUR/JPY

1

EUR/CHF

1

GBP/USD

1

GBP/JPY

1

GBP/CHF

1

USD/JPY

1

USD/CHF

1

CHF/JPY

1

Additional Fee

Continuous rate

-

Conversión

- pips

Regulation

No

FCA

No

CYSEC

No

ASIC

No

CFTC

No

NFA

No

BAFIN

No

CMA

No

SCB

No

DFSA

No

CBFSAI

No

BVIFSC

No

FSCA

No

FSA

No

FFAJ

No

ADGM

No

FRSA

Your capital is at risk.

Rating

Total cost

$ 0 Commission 0.1

Mobile App
10/10

Min.Deposit

$50

Spread min.

- pips

Leverage max

500

Currency Pairs

40

Trading platforms

Demo
Webtrader
Mt4
STP/DMA
MT5

Funding Methods

Bank Transfer Credit Card Neteller Skrill

What you can trade

Forex

Indices

Actions

Raw Materials

Average spread

EUR/GBP

-

EUR/USD

-

EUR/JPY

-

EUR/CHF

-

GBP/USD

-

GBP/JPY

-

GBP/CHF

-

USD/JPY

-

USD/CHF

-

CHF/JPY

-

Additional Fee

Continuous rate

-

Conversión

- pips

Regulation

No

FCA

No

CYSEC

No

ASIC

No

CFTC

No

NFA

No

BAFIN

No

CMA

No

SCB

No

DFSA

No

CBFSAI

No

BVIFSC

No

FSCA

No

FSA

No

FFAJ

No

ADGM

No

FRSA

71% of retail investor accounts lose money when trading CFDs with this provider.

A 20-pound note with coins

History of the Pound

The pound is a much older currency than the U.S. dollar, of course. It’s been around for more than 1,200 years. In the 8th century, in the Anglo-Saxon kingdoms, 240 pennies made up one pound.

The United States Dollar

Although it’s not nearly as old as the pound, the U.S. dollar has been the United States’ standard monetary unit for more than 200 years.

The U.S. dollar is the most traded currency on this planet. It is also the world’s number one reserve currency.

How the GBP/USD is Traded

Although there are other ways to trade this currency pair, we’ll focus only on how it’s done with retail forex trading.

GBP/USD Lot Size

A standard lot in forex is 100,000 of a particular currency pair. However, most retail forex brokers offer lot sizes as small as 0.01 lots, which is 1000 of the particular currency pair. This is called a micro lot. Some trading platforms denote this as a 1K lot size. Others refer to a 1K lot as one unit.

For a really small investor, a 1K lot sounds like a very big trade size. After all, how would someone with a $500 account be able to open a 1000 pound position?

Well, the great thing about trading forex is that retail brokers allow you to trade with leverage. The leverage offered by retail forex brokers generally varies between 1:100 and 1:1000. Some brokers offer ridiculously high leverage of 1:2000, 1:3000, and even 1:5000.

Of course, some countries regulate the amount of leverage you can use as a retail forex trader. For example, the United States allows a maximum leverage of 1:50.

Let’s use 1:100 leverage as an example. If you have a $500 account and you want to open a 1K trade on the GBP/USD, you will need less than $13.00 to open this position.

This is based on an exchange rate of 1.29500 dollars per 1 pound. Without using leverage, this would not be possible because a 1K lot of the GBP/USD is worth $1295.

Pip Value of the GBP/USD

To establish the pip value of the GBP/USD, we first need to consider what a pip is. If the GBP/USD is trading at 1.30010 and the exchange rate moves to 1.30020, it has moved one pip higher. The fourth digit after the decimal point is called a pip.

To calculate the pip value of the GBP/USD, we’ll use a 1K lot as an example. On the GBP/USD, one pip is 0.0001, or 1/10000 of one U.S. dollar. Multiply this by 1000 and you get $0.10. This is the pip value of a micro lot (1k lot) of the GBP/USD.

Profit and Loss Calculation

Are you doing your calculations correctly?

Here at FXLeaders, we go the extra mile to offer traders the best forex signals possible. In 2016 alone, we bagged a phenomenal 4,907 pips! A substantial amount of these gains came from our GBP/USD signals.

Let’s calculate how much money you’d make if you traded a GBP/USD signal with 12 micro lots and hit a profit target of 276 pips. 12 micro lots, is 12,000 of the GBP/USD currency pair. If we multiply this by $0.0276, which is 276 pips, we get $331.20. (12,000X$0.0276=$331.20).

If that sounds a little bit complicated, you can just multiply the pip value of a 1K lot, which is $0.10, by the number of micro lots traded, and multiply this number by the number of pips you made: $0.10 pip value X 12 micro lots X 276 pips = $331.20.

Instruments Correlated to the GBP/USD

Correlated Currencies

Other pound pairs are generally correlated to the GBP/USD. Some of the pairs with the highest correlation to the GBP/USD include: EUR/GBP: -0.89, GBP/AUD: 0.96, GBP/CAD: 0.96, GBP/CHF: 0.95, GBP/NZD: 0.94, and GBP/SGD: 0.91.

Correlated Equity Indices

The only stock index with a notable correlation to the GBP/USD is the UK100 with an inverse one-year correlation of -0.85. This means that the UK100 tends to decline when the GBP/USD rises, and vice versa.

Major Economic Events that Impact the GBP/USD

Of the many economic events that influence the GBP/USD, there are a few that can cause substantial volatility in this exchange rate:

1. Monetary Policy – Actions and Comments by Central Banks

Monetary policy is certainly one of the most important drivers of the GBP/USD. The Federal Reserve of the United States and the Bank of England are in charge of their countries’ monetary policies.

When the FED and the BOE comment or take action in regards to interest rates, quantitative easing, inflation, and economic growth forecasts, it often causes violent moves in the GBP/USD exchange rate.

Mark Carney, governor of the Bank of England (BOE)

2. Economic Indicators

Economic indicators are used to analyze how well a country’s economy is performing, and to predict future economic growth. There are three main categories of economic indicators; leading, lagging, and coincident indicators.

Indicators like GDP numbers (gross domestic product), CPI numbers (consumer price index), interest rate decisions, the unemployment rate, wage growth, industrial production, and retail sales numbers, are released regularly in both the U.S. and the United Kingdom.

Although these aren’t the only important economic indicators, they have the greatest potential to move the GBP/USD, especially interest rate decisions, GDP and CPI numbers, and labor market data (like the U.S. nonfarm payrolls numbers, unemployment rate, etc.).

Economic news out of both the United Kingdom and the United States can move the GBP/USD exchange rate considerably.

The GBP/USD often makes powerful moves in short periods of time. This is important to keep this in mind when you trade this pair.

 

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