Managing your currency requirements can be confusing enough without trying to understand all the industry related jargon you read and hear. Here's a useful glossary to help you demystify those commonly used foreign exchange and economic terms that might leave you scratching your head.



An analyst – also called a currency strategist – researches and analyses market conditions on behalf of an FX provider. They produce informative commentary around the economic and political issues that impact currency values.


Australian dollar


Abbreviated term for the Australian dollar.


Bank of England (BoE)

The central bank of the UK.

Base Currency

The first currency listed in a currency pair e.g. GBP/EUR – also called the transaction currency.


A trader who expects prices to fall.

Bear market

When prices within a certain currency market – e.g. GBP/EUR – are declining.


The belief that prices within a certain market will fall.


An individual or firm that acts as an intermediary between buyers and sellers of currency to facilitate the execution of orders, for a fee or commission.


A trader who expects prices to rise.

Bull market

When prices within a certain market – e.g. GBP/EUR – are rising.


The belief that prices within a certain market will rise.



Nickname for the GBP/USD (Great British pound/US dollar) pair – so called because the rate was originally transmitted to the US via a transatlantic cable.


Canadian dollar.

Central Bank

A national bank that controls the production and distribution of money and credit for a nation or a group of nations. They are also responsible for overseeing and implementing its monetary policy.

Commodity Currency

Currencies from economies whose exports are largely based on their natural resources. This typically refers to Canada (CAD), New Zealand (NZD) and Australia (AUD).

Consumer Price Index (CPI)

CPI is a monthly measure of the change in the cost of a fixed basket of consumer goods and services purchased by households in a region.


The standard unit of foreign exchange trading.

Cost of Living Index

An index that measures differences in the price of goods and services in a region over time.

Counter Currency

The second currency listed in a currency pair e.g. GBP/EUR.


A system of money issued by a government or central bank for use as legal tender and a basis for trade.

Currency Pair

Two currencies that form a foreign exchange rate: for example, GBP/EUR.

Currency Risk

The likelihood of political and economic variables to cause a negative movement in exchange rates.



A live currency trade at the current market price.


An individual or organisation that buys and sells assets from their own portfolio.

Dealing Spread

The amount that the buying and selling price of a contract differs.


Tone of language that suggests easier monetary policy or lower interest rates are needed – the opposite of hawkish.



European Central Bank – the central bank for countries using the euro (EUR).

Economic indicator

A statistic – such as employment rates, GDP and inflation – issued by a government that indicates a nation’s current economic growth and stability.

European Union (EU)

A political and economic union of 28 member states – 19 of which use the euro (EUR).




A monetary union of EU member states that have adopted the euro as their common currency and sole legal tender.

Exchange Rate

The value that one currency is exchanged for another.


(The) Fed

Abbreviation of The Federal Reserve Bank – the central bank of the United States.

Fed Officials

The Board of Governors of the Federal Reserve or regional Federal Reserve Presidents.

Federal Open Market Committee (FOMC)

A committee within the Federal Reserve that’s responsible for setting monetary policy in the US.

Foreign Exchange

The buying of one currency and selling of another, or the conversion of one currency into another. It also refers to the international market in which currencies are traded virtually.


Abbreviation of Foreign Exchange.

Forward Contract

A pre-arranged exchange rate for a foreign exchange contract that’s to be executed in the future.


Abbreviation of Foreign Exchange.


G20 Summit

The annual meeting of the G20 – political leaders, finance ministers and central bank governors from 19 countries and the European Union (EU).


Great British Pound.


Nickname for the US dollar (USD).

Gross Domestic Product (GDP)

The total value of goods produced, and services provided within a country’s physical borders during a year – it can also be calculated quarterly. The GDP reading is an indicator of a country’s economic health.



Tone of language that suggests higher interest rates are needed, usually to combat inflation or restrict rapid economic growth or both – the opposite of dovish.


Investors reduce the risk of adverse currency market movements by making two opposing investments, minimising the losses which could be incurred by price fluctuations.


Hong Kong Dollar



A sustained increase in the price of goods and services, eroding purchasing power.

Interbank Rate

The fluid price at which banks trade currencies with each other.

Interest Rate

The cost of borrowing money, usually expressed as a percentage – a region’s central bank sets the interest rate.

International Monetary Fund (IMF)

The IMF is an organisation of 189 countries, working to take advantage of the opportunities—and manage the challenges—posed by globalisation and economic development.



Japanese Yen



Nickname for the New Zealand dollar (NZD).


Limit Order

A target exchange rate that the market must reach before an order is executed.

Long Position

When the base currency – the first of the two currencies in a pair – is bought, the position is said to be long. This position is taken with the expectation that the market will rise in value.


Nickname for the Canadian dollar (CAD).


Market Order

An order to buy or sell currency instantly at the best available price.

Market Rate

The current value of a currency pair.



New Zealand dollar.



A derivative giving the right – rather than the obligation – to buy or sell currency at a specific price before a specified date.


An instruction to execute a trade.

Overnight Position

A position that remains open until the following trading day.



Percentage in Point – the smallest unit of price for any foreign currency i.e. digits added to or subtracted from the fourth decimal place: for example, 0.0001.

Political Risk

Exposure to changes in government policy, which may have an adverse impact on a currency’s market value.


A collection of investments owned by an organisation or individual.


A long or short trade taken by a trader.

Pound Sterling

The currency of United Kingdom of Great Britain and Northern Ireland, Guernsey, Isle of Man and Jersey.

Producer Price Index (PPI)

A group of indexes that measure the average change in selling prices received by producers of goods and services in a region over time.

Purchasing Managers Index (PMI)

An economic indicator of the performance of the manufacturing industry within a country.


Quantitative Easing

Unconventional monetary policy, whereby a central bank injects money into an economy to try and stimulate economic growth.



When the price of a currency trades between a defined high and low, moving within these two boundaries rather breaking out of them – also known as a sideways market, flat market or trendless market.

Reserve Bank of Australia (RBA)

The central bank of Australia.

Risk Appetite

The level of currency risk a trader is willing to be exposed to.

Risk Averse

Traders with low levels of tolerance to uncertainty. They prefer lower returns with known risks over higher returns with unknown/uncertain risks.

Risk Management

The use of financial analysis and trading tools/techniques to manage risk exposure.


Safe Haven

Currencies that are expected to retain or increase in value during times of market volatility – these typically include the Japanese yen (YPY), Swiss franc (CHF), euro (EUR) and US dollar (USD).

Short Position

When the base currency – the first of the two currencies – in a pair is sold, the position is said to be short. This position is taken with the expectation that the market will fall in value.


The difference between the price that was requested and the price the order is executed at, due to market volatility. In such circumstances, traders typically use market orders and stop loss orders.


A sudden upward or downward movement in the value of a currency in a short period of time.

Spot Contract

The purchase or sale of a currency for immediate settlement – typically settled electronically.

Spot Price

The current market price.


Another name for the Great British pound (GBP)

Stop Loss Order

A risk management tool used to place an order to buy or sell currency once the rate reaches a certain level.


Technical Analysis

The process of forecasting market movements and prices by analysing relevant political and economic data.


A person who trades, buys and/or sells currencies on the foreign exchange market – also know as a currency trader, foreign exchange trader or forex trader.

Trading Platform

A software application used to buy and sell currency over the internet.

Transaction Cost

The cost of buying or selling currency.

Transaction Date

The date a trade is executed.


Unemployment Rate

Measures the percentage of a region’s workforce that is unemployed and actively seeking employment, on a monthly basis.


United States dollar.



The level of uncertainty surrounding fluctuations in the value of a currency. Volatility is usually characterised by rapid, unexpected market movements.

Value Date

The value date is the day that the currencies are traded, not the date on which the traders agree to the exchange rate. The value date for spot trades in foreign currencies is usually set two days after a transaction is agreed on.


World Trade Organisation (WTO)

The WTO regulates international trade and coordinates international relations between its 150+ members.


Yen (JPY)

Japanese Yen – the currency of Japan.


The percentage return from an investment.

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