Fantastic currency #3: The Great British Pound versus The American Dollar (GBP/USD)
This currency pair
is the fourth most traded currency pair in the Forex market.
Before we go into it, let’s first talk about the stock exchange that is most linked to the GBP/USD, or the Pound Sterling.
I’m talking about the London Stock Exchange (LSE).
Their time opens at 8:00am and closes at 16:30pm.
This means that the LSE opens at 10:00am and closes 18:30pm our time.
But like all currency pairs, the GBP/USD is open 24 hours a day, 5 days a week.
I’ve personally found that the best times to trade the GBP/USD is from 9:00am up until 10pm, our time, when America’s markets close.
After 10pm, there seems to be very little movement and fewer trends forming as the main stock exchange are closed in Europe, America and many other parts of the world.
Most of the business transactions that are switched between the European countries and America are during the times their stock exchanges are opened.
But to qualify this, let’s delve into why the GBP/USD is so popular to trade.
What makes the pound the fourth most traded currency pair
The UK not only left the EU, but also never chose to adopt the Euro as its currency.
There are a number of reasons namely, Pride, prejudice, and power.
This makes perfect sense as the pound is the oldest currency that’s still in use today.
Yes, the U.K wanted to maintain control of its domestic interest rates and the stability of their government decisions.
The pound acts as a large reserve currency.
And for this reason, the pound has kept its higher value worth currency compared to other countries.
For example: One pound will buy you.
1.2700 US Dollars
17.26 South African rands
This means that the pound is stronger than the majority of major currency pairs if not ALL. And this is why investors and huge institutions flock to the pound.
Another reason why the pound is heavily traded is because, the currency is not only used in the UK (England, Scotland, Wales and Northern Ireland).
The pound is also the currency used in independent islands of Jersey, Guernsey and the Isle of man surrounding the British Isles.
And having this form of exposure has helped the GBP/USD gain worth up to around $470 billion per day. This accounts for up to 41% of all Forex transactions that happen in the UK.
And this means 9.2% of all the currency trades on the Forex market happen, thanks to the Great British Pound.
You see the GBP/USD, despite being the fourth most traded currency, is also famous for showing high-volatility.
You’ll tend to see huge fluctuations during political or economic events such as,
Interest rate decisions
These events attract foreign and domestic FX traders to buy and sell the pound.
And I am no different.
On the 12 September 2016, I told my Forex Trader subscribers to sell (short) the GBP/USD at 1.3350. on the 15 September (3 days later), I told them to close their position at 1.3260.
And in just three days, my subscribers were able to bank a 45.23% gain.
You can get more information on how you can join them go here
In the next couple of articles, we’ll uncover the fourth and final fantastic currency pair I love to trade.
“Wisdom yields Wealth”