GBP/USD Guide
GBP/USD, known as cable, is one of the oldest and most volatile major currency pairs. It pairs the British pound against the US dollar and is popular among day traders and swing traders for its wide trading ranges.
The nickname cable dates back to the 19th century when quotes were transmitted via undersea telegraph cable between London and New York. GBP/USD typically shows higher volatility than EUR/USD, with average daily ranges often exceeding 100 pips. The pair is driven by interest rate decisions from the Bank of England (BOE) versus the Federal Reserve, UK economic data (GDP, CPI, employment), and political factors such as Brexit-related developments.
Sterling is sensitive to capital flows, foreign direct investment, and the UK's trade balance. Because the UK runs a current account deficit, GBP tends to weaken during risk-off episodes. The pair also has a strong correlation with UK gilt yields and the FTSE 100. Key technical levels often align with psychological round numbers (1.3000, 1.3500, 1.4000) and are well-respected by the market.
Trading GBP/USD
GBP/USD rewards traders who understand UK-specific catalysts: monthly GDP estimates, BOE inflation reports, and political events. The pair is most volatile during the London session and the London–New York overlap. Stop-losses should account for the pair's tendency for sharp spikes. News traders focus on UK labour market data, CPI, retail sales, and BOE votes.
FAQs
Why is GBP/USD called cable?
The name comes from the transatlantic telegraph cables laid in the mid-19th century that transmitted exchange rate quotes between London and New York.
Is GBP/USD more volatile than EUR/USD?
Yes, GBP/USD typically has a larger average daily range and is more prone to sharp moves on data releases, making it popular among active traders.
What factors affect GBP/USD most?
BOE vs Fed interest rate expectations, UK inflation data, GDP growth, and political stability are the primary drivers. Brexit and Scottish independence referendums have also been significant.