Top Brokers for Investing in GBP to USD (British Pound)

Trading the British Pound (GBP) against the US Dollar (USD) is a way to speculatively profit from changes in the exchange rate (forex). In this article, we will discover all what you need to know about trading GBP/USD.

What is GBP/USD Trading?

Do you want to know what it means to trade GBP/USD? The currency pair quote, when trading the British pound (GBP) against the US dollar (USD), indicates how many US dollars are needed to buy one British pound.

• The GBP/USD rate is a method of trading global economic activity as the United States has the largest economy in the world and the United Kingdom has the fifth largest economy.
• It is the third most traded major currency pair internationally and one of the most liquid currency pairs.
• The GBP/USD pair is sometimes referred to as "Cable" because, historically, telegraph cables were used to send information about currency trading between London and New York.

How Does GBP/USD Trading Work?

For exchange rates like GBP/USD, currency brokers like Plus500 and XM provide two prices: the bid price and the ask price.

• The spread is the difference between the bid and ask price. The price is expressed in pips, or units.
• One pip is equivalent to 0.0001 of the price spread that was quoted.

The GBP/USD Exchange Rate Over Time

For most of the 1800s and until the start of World War I, a pound (£1) was worth just under five dollars. However, the value of the pound briefly reached $10 during the American Civil War.

More than 60% of the world's debt was held in pounds sterling, which was the most important currency at the time of World War I.

Why is the GBP/USD Pair Fluctuating?

Economic data and attitudinal factors can influence the value of the dollar against the pound, as both the U.S. and the U.K. are key players in global trade and have global financial centers in London and New York, respectively.

Government Reserve

The value of the U.S. dollar is heavily influenced by the Federal Reserve's (Fed) interest rate and inflation policies.

The British Central Bank

Just as the Fed influences the value of the dollar, the Bank of England (BoE), the UK's central bank, also has an impact on the value of the British pound.

Inflation

Inflation figures are a key determinant of interest rate policy for the Fed and the BoE.

Employment Data

The health of the U.S. and U.K. economies can be determined by examining employment statistics, which also influence the economic stimulus policies of governments and central banks.

What is the Trading Strategy for the GBP/USD?

When trading the GBP/USD, it is crucial to use fundamental and technical research to help you determine when to enter and exit trades. You can use a variety of GBP/USD trading techniques, depending on your level of expertise, risk tolerance and chosen trading style.

News Trading Approach

Speculating on the volatility that news releases can produce is the goal of a news trading strategy.

Price Movement Approach to Trading

Price action tactics focus on tracking the past price movement of an asset to identify trends that could predict where it will trade in the future.

Trading Strategy for Breakouts

When a market breaks out of a price trend, breakout trading in forex focuses on open positions.

FAQ

When to Trade GBP/USD?

You can trade this currency pair 24 hours a day, and you can decide which hours best suit your trading style and risk tolerance.

Is GBP/USD a Good Pair?

Your trading strategy, level of expertise and risk tolerance will determine whether or not the GBP/USD is an appropriate currency pair for you.

How Do I Calculate GBP vs. USD?

To calculate the conversion of British pounds (GBP) to US dollars (USD), you can use the exchange rate for the day of conversion.