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Capitolo 2 di 5

Major Currencies and Trading Systems

Not all currencies are equal. A handful of major currencies account for the vast majority of global Forex volume. This chapter profiles each major, explains cross-currency relationships, and examines the two primary trade execution methods: broker-intermediated and direct dealing.

2 lezioni
1

The Major Currency Pairs

Seven currencies dominate Forex trading and are called the 'majors'. All majors are quoted against the US Dollar (USD), which appears in over 88% of all trades (BIS 2022 data).

EUR/USD β€” 'The Fibre': Most traded pair globally. Driven by ECB vs Federal Reserve policy divergence, Eurozone growth differentials, and risk sentiment.

USD/JPY β€” 'The Gopher': Heavily influenced by Japanese monetary policy (historically ultra-loose), US Treasury yields, and risk-off flows into the yen.

GBP/USD β€” 'Cable': Named after the transatlantic telegraph cable that transmitted prices in the 19th century. Sensitive to UK economic data and BoE policy.

USD/CHF β€” 'The Swissie': CHF is a safe-haven currency. Rises in uncertainty often see USD/CHF fall as investors buy francs.

USD/CAD β€” 'The Loonie': Correlated with oil prices given Canada's export-driven economy.

AUD/USD β€” 'The Aussie': Tracks commodity prices (iron ore, copper) and China's economic outlook.

NZD/USD β€” 'The Kiwi': Smaller pair, sensitive to dairy prices and RBNZ policy decisions.

Punti Chiave
  • USD involved in 88%+ of all Forex transactions (BIS 2022)
  • EUR/USD is the most liquid pair β€” tightest spreads globally
  • JPY is a safe-haven currency; yen strengthens during market stress
  • Commodity currencies (CAD, AUD, NZD) correlated to raw material prices
PairNicknameShare of VolumeKey Driver
EUR/USDFibre~23%ECB/Fed policy divergence
USD/JPYGopher~17%BoJ yield curve control
GBP/USDCable~11%BoE policy, UK data
AUD/USDAussie~6%Commodities, China growth
USD/CADLoonie~5%Oil prices
USD/CHFSwissie~5%Safe-haven flows
NZD/USDKiwi~4%Dairy prices, RBNZ
Caso Studio: Safe-Haven Flow into JPY
Bank of Japan Β· USD/JPY spot
During the onset of the COVID-19 market shock in March 2020, global risk assets sold off sharply. A broker analyst at an Asian bank's FX desk observed USD/JPY fall from 112 to 101 within two weeks as global investors unwound carry trades (borrowing in low-yield JPY to buy high-yield assets) and repatriated funds into yen. The Bank of Japan was passive during the initial drop, allowing the market-driven appreciation to proceed β€” a reminder that BoJ intervention typically targets yen weakness, not yen strength.
Insegnamento: Safe-haven currencies like JPY strengthen during risk-off episodes as carry trades unwind.
Domande di Ripasso
QWhy is USD/JPY sensitive to US Treasury yields?
Higher US Treasury yields attract capital flows into USD assets. Since Japan has historically maintained near-zero interest rates, yield differentials between US Treasuries and JGBs drive USD/JPY higher when US rates rise.
2

Trade Execution β€” Brokers vs Direct Dealing

Forex trades are executed through two main channels.

Voice / Electronic Brokers: Brokers match buy and sell orders between banks without acting as principal. Historically this was done by phone; today platforms like EBS (Electronic Broking Services) and Reuters Matching handle the bulk of interbank flow electronically. Brokers earn a commission on each trade rather than a bid-ask spread.

Direct Dealing: Banks trade directly with one another (or with large corporate clients) via bilateral agreements. The market-making bank quotes a two-way price; the counterparty hits the bid or lifts the offer. Reuters Dealing and Bloomberg's FXGO platform are widely used.

Prime Brokerage: Large hedge funds and asset managers access interbank liquidity through a prime broker, which extends credit and consolidates settlement.

For retail participants, FX brokers provide access via margin accounts, typically offering leverage of 30:1 (EU regulated) to 500:1 (offshore). The broker either acts as a market-maker (taking the other side of client trades) or as a straight-through processing (STP) conduit to interbank liquidity.

Punti Chiave
  • Interbank brokers: match buyers and sellers, earn commission, no principal risk
  • Direct dealing: bilateral quotes, market-maker takes principal risk on spread
  • EBS and Reuters Matching are dominant interbank electronic platforms
  • Retail brokers: market-maker or STP model; leverage varies by jurisdiction
Domande di Ripasso
QWhat is the difference between a market-making broker and an STP broker?
A market-making broker takes the opposite side of client trades (principal risk), profiting from the spread. An STP (Straight-Through Processing) broker passes client orders directly to interbank liquidity providers, earning a mark-up on the spread without taking principal risk.
Major Currencies and Trading Systems β€” Forex Course | MarketsFN