Currency pairs act as the backbone of the forex market, enabling traders to speculate on economic trends, geopolitical events, and financial strategies around the world. For those unfamiliar, currency pairs represent the quotation of two different currencies, indicating how much of one currency is required to buy another. For instance, in the EUR/USD pair, the Euro is the base currency, while the US Dollar is the quote currency. But why are these pairs so pivotal, and how do they influence the dynamics of forex trading? Let’s take a closer look. Understanding Major, Minor, and Exotic Pairs Currency pairs in the forex market are categorized into major, minor, and exotic pairs,…

Central banks play a pivotal role in shaping the dynamics of the foreign exchange (Forex) market. While traders and investors drive daily transactions, the actions of central banks set the stage for major currency movements. Understanding their influence is critical, particularly in a market valued at over $6.6 trillion in daily trading volume (BIS, 2019). Below, we explore the primary ways central banks impact forex market trends and strategies. Central Banks and Monetary Policy One of the core responsibilities of central banks is to implement monetary policy, which directly affects a country’s currency value. Through tools such as interest rate adjustments, quantitative easing (or tightening), and open market operations, central…