7. What is the Base Currency and the Quote Currency?

Reading Forex quotes is very easy once you get the hang of it, because it only has two components: the base currency and the counter or quote currency. When the base currency is USD, think of the quote as telling you the value of it in that other currency.

The currency to the left of the forward slash is known as “the base currency” while the currency on the right is termed the quote or counter currency. The base currency ALWAYS has a value of 1.

Base currency, Counter currency, GBP/USD

In the example above, the GBP (Great Britain pound) is the base currency while the USD (U.S. dollar) is the counter currency. So the quote would read : £1 is equivalent to $1.5686.

In other words, if you want to purchase one British pound you would have to pay 1.5686 in U.S. dollars. If, however, you would want to sell one unit of the base currency, you would receive 1.5685 U.S. dollars for it.

The position of a currency in the quote is strictly determined and standard. For the  Euro and U.S. Dollar pair, it is EUR/USD and never USD/EUR.

When a currency quote does not include the U.S. dollar as one of its components, this is called a cross currency. The most popular cross currencies among traders are the EUR/GBP, EUR/CHF and EUR/JPY.

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