Forex Fundamentals
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FX Mechanics

FX mechanics are the rules every currency trade runs on: which currency a pair quotes in which, what buying a pair really means, and how the interest rate gap between two currencies pulls on their price. These guides explain each one with worked examples.

The guides

  • What Is Base and Quote Currency?

    What is base and quote currency? The first and second currency of a pair: the price is how much of the quote one base buys, and your profit is in the quote.

  • What Is an Interest Rate Differential?

    What is an interest rate differential? The gap between the interest rates of a pair’s two currencies: how to work it out, how it becomes swap, why it moves.

  • Anatomy of a Rate Differential

    Anatomy of a rate differential: why the expected gap moves a pair more than today’s, how inflation makes a nominal gap a real one, and when the gap gives way.

  • Currency Pairs and Relative Pricing

    Currency pairs and relative pricing: a pair is one currency priced in another, so every move has two sides. How to read EUR/USD, crosses and the news on them.

Where to see it in the data