GBP/USD GBPUSD

The GBP/USD is a very popular currency pair, and one of the oldest traded pairs in the world. It measures the value of 1 Pound Sterling against the U.S. dollar. It is affected by changes in both currencies, and could be influenced by changes in interest rates decided upon by the Bank of England or the U.S. Federal Open Market Committee. It also usually displays a positive correlation with the EUR/USD pair, and a negative correlation with the USD/CHF, since all three are affected by changes in the European economy.

When investing in this pair, a trader can open a short or long position. When opening a long position, the trader hopes that the ratio between the currencies will shift in favor of the GBP, so 1 Pound will be worth more in USD, thus generating a profit when selling the Pound. For example, if The Pound is valued at 1.2 USD when opening the position, and 1.3 USD when closing the position, the trader will make a profit of 10%. A short position works similarly, only in this case, the trader hopes that the USD will strengthen against the GBP.
However, shifts in the currency market are measured in pips. A pip is the smallest unit of movement, to the fourth decimal place, meaning each pip equals 0.01%. Since traders wish to capitalize even on these small movements, a lot of capital is required to profit from such a shift.
In mid-2016, the U.K. voted to break away from the EU, in a decision known as Brexit. This decision caused great concern in the global financial sector, and sent the GBP crashing, losing 9% in one day. Some traders predicted this change and made an incredible profit.