Currency pairs, explained without the jargon

Base currencies, quote currencies, and pips: start with the building blocks.

A foreign exchange rate expresses the price of one currency in another. Each pair has a base currency, written first, and a quote currency, written second.

A simple example

An illustrative EUR/USD rate of 1.0800 means one euro is worth 1.08 US dollars. This is a teaching example, not a live quotation. If the rate rises, the euro has strengthened relative to the dollar.

What is a pip?

A pip is a conventional unit for describing a rate change. For many pairs it is 0.0001; yen pairs commonly use 0.01. Providers can display additional fractional digits, so check their definitions.

Understand the two prices

A bid and an ask describe two sides of a quote. Their difference is the spread. A displayed midpoint is useful for comparison but may not be a tradable price.

For general education only. Not investment advice. Examples are illustrative, and market conditions can change.