Forex · 2 MIN READ
Currency pairs: learning to read the quote
Base currency, quote currency and a simple way to understand EUR/USD without the jargon.
A foreign exchange rate describes the price of one currency in terms of another. That is why forex is expressed as a pair. EUR/USD, for example, compares the euro with the US dollar; the order matters when interpreting the number.
Base currency and quote currency
The first currency is the base. The second is the quote. In a hypothetical EUR/USD quote of 1.1000, one euro is worth 1.10 US dollars. This example illustrates the notation and is not a current market price.
Reading a change
If the same hypothetical quote moves from 1.1000 to 1.1100, one euro buys more dollars than before. The euro has strengthened relative to the dollar in that pair. This says nothing on its own about the euro’s performance against other currencies.
Reference rates and actual transactions
Published reference rates can help explain currency movements. They are not necessarily rates available for a particular transaction. A bank or currency provider may quote a different rate and may include a spread or additional fees.
Currency pairs are a language for comparing value. Once the order of the currencies is clear, the direction of a price move becomes much easier to interpret. That basic reading skill should be kept separate from any prediction about what happens next.
Further reading
European Central Bank — The role of exchange rates
Investor.gov — Foreign currency exchange
