How to Trade GBP/USD

http://7binaryoptions.com/The GBPUSD is a particular pair to trade since it seems to work in its own way. It is often referred to as “cable” for many reasons.

The Major GBPUSD Currency Pair

As the US, the British economy is also one of the top three economies in the world. The strengths of their economy are reflected as well on the Forex and binary options market where both currencies are classified as the most liquid currencies along with the euro.

The GBPUSD has a wider spread than EURUSD and is perfect for those who like scalping, and those who favour automated trading for their short timeframe trades. This pair is characterized by a bigger actual range (or tunnel trading) due to frequent movement. It is one of the most traded currency pairs in the world.

As binary options traders, or future traders of this particular currency pair, there are some factors which should be considered when trading GBPUSD. Pay attention to the following:

  • The GBPUSD pair mainly moves when the European and USD sessions are taking place since the European market is the most active then, so you should pay attention to trade during these sessions and avoid Asian markets trading times;
  • Try to trade especially when Retail Sales and the GDP news in the UK are released since they stimulate the movement of the GBP even more than usual. This news put the GBPUSD pair into the spotlight and that is when you should take action;
  • Take a peek into the economic calendar and observe the dates reserved for setting the interest rates, one of the major tasks of the central banks. The Bank of England is meeting on a monthly basis, whereas the Federal Reserve in the US meets every 6 weeks. This means that you should take a look at the at least once a month. Interest rates define the course of currency movements and are an important part of the monetary policies in each country.

News to be Watched in the UK

The GBP is one of the best known and most significant currencies on a global level. Big news releases have a tremendous effect on the GBP movement in the market.

The UK might be still a member of the EU, but it never used the euro as its currency but stayed loyal to its national Pound. The central bank in charge of the British monetary policy is the Bank of England which has the task to keep inflation a slow as 2%. The Bank relies on the Monetary Policy Committee (MPC) to check on inflation and economic activity in the UK every 30 days.

The UK keeps these meetings private as opposed to the European Central Bank, with the exception when interest rate changes are announced, then, the MPC publicly announces such events.

The movement of GDP in the financial market can also be intensively felt when the UK GDP news are released, whereby the preliminary results are as important as the end results since there are no significant changes added to the final version. Retail Sales and the Purchasing Manger Index (PMI) are also the kind of news that keeps the GDP moving.  The PMI carefully examines economic activity by sector, i.e. construction, manufacturing, and the service sector. As a trader, do also not miss to check on the inflation or Consumer Price Index (CPI) which contributes to the GBP volatility in the fast market. The CPI is one of the key priorities of the Bank of England and this news actually accounts for the most aggressive price movement of the GBP.

Notable Economic News in the USA

As the world’s biggest economy, the USA has a lot of important news to share every month. The USA remains unbeaten when it comes to the economic status and as such, the US economy is significant beyond US borders as well.

Important news on US economy and relevant data for trading can be gathered from the jobs data issued by the Federal Reserve and the CPI referring to the inflation rate, as well as from the Institute for Supply Management (ISM), Retail Sales, GDP, and Manufacturing and Non-Manufacturing, Durable Goods Orders release, etc.

What is In for Traders in Economic Releases?

Since job growth is really turning the market upside down, prepare for major GBPUSD price movements upon Non-Farm Payrolls news in the USA and Claimant Count release in the UK as they represent a basis for the decisions that central banks of both power countries will take into account when defining their monetary policies. PMI and ISM news can also be useful since they reveal important service sector data like contradictory or expansionary conditions, as well as the status of manufacturing and construction sectors giving traders the opportunity to make an educated guess on what decisions will be made on the subsequent bank meetings.

The Federal Reserve’s Federal Open Market Committee holds regular meetings every six weeks and every 2nd or 3rd meeting is open for the press, whereby the USD experiences sudden movements causing fluctuations of other USD-related currencies as well, including, of course, the GBPUSD currency pair a swell.

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