Glossary

Also referred to as the offer price. The price at which the market is willing to sell.

The first currency in a currency pair; it shows how much the base currency is worth against a second currency. For example, if the USD/EUR rate equals 1.1299, then one US dollar is worth 1.1299 EUR.

Pessimistic outlook; favoring declining market conditions.

A person or company that is the recipient of a payment.

The opposite of an ask price; the price at which the market is willing to pay.

Bullish/ Bull Market

Optimistic outlook; favoring strengthening market conditions.
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Central Bank

A government organization that manages a country’s monetary policy.

Commodity Currencies

Currencies which depend heavily on the export of certain raw materials i.e. oil, timber, iron, coal, and aluminum.

Consumer Price Index (CPI)

A measure of the average change in prices of a basket of consumer goods over a period of time.

An exchange rate between two currencies, in which neither is the currency of the country where the pair is quoted. For example, in the US, a EUR/JPY quote is considered a cross rate.

Currency Pair

Two currencies make up a foreign exchange rate.

Unpredictable profits or losses associated with the change in price of one currency in relation to another can be reduced by hedging, which offsets currency fluctuations.

Three letter symbol that represents a specific currency; for example, USD (U.S. Dollar).

Dovish

Refers to policymakers who support lower interest rates. 

Drawdown

To pull from a total amount either in part of in full.

The value of one currency for the purpose of conversion to another.

The global marketplace where participants can buy, sell, or exchange currencies.

Agreement to buy/ sell currency at a pre-specified exchange rate, with added forward points, at a future date.

Pips, based on interest rate differentials, are added to or subtracted from the current exchange rate in order to calculate a forward price.

The G7 is a group of seven nations, which include the United States, Canada, Japan, the United Kingdom, Germany, France, and Italy.

The same member countries as G7, plus Russia.

Nickname for the US dollar.

Hawkish

Opposite of Dovish; refers policy makers who support higher interest rates.

Hedge

An investment to reduce currency risk, normally through products like standing orders or forward contracts.

Inflation

Increase in consumer good prices and decrease in purchasing power.

Interbank Rates

Foreign exchange rates that large international banks quote each other.

ISM Manufacturing Index

The monthly index released by the Institute of Supply Management evaluates the US manufacturing sector by tracking the amount of manufacturing activity for the previous month. A value over 50 indicates economic growth – values are between 0 and 100.

ISM Non-Manufacturing Index

Monthly index based on more than 400 surveys of non-manufacturing firms by the Institute of Supply Management. Values over 50 indicate growth in the non-manufacturing sector.  

Job Openings and Labor Turnover Survey (JOLTS)

A monthly survey by the US Bureau of Labor Statistics that measures job vacancies.
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Long Position

Purchasing currency with the expectation that the value of the asset will rise; for example, when the base currency is bought, the position is long.

Loonie

This is a nickname for the USD/CAD currency pair.

Request for additional funds on a position that has moved against the customer.

Risk management tool used to place a buy/ sell order once the spot rate reaches a predefined level.

The smallest incremental move an exchange rate can make; one-hundredth of a percent (0.0001).

The amount by which the forward price exceeds the spot price.

Economic indicator of the manufacturing industry, based on five areas: new orders, inventory levels, production, supplier deliveries, and employment environment.

When a central bank injects money into an economy with the hope of stimulating growth.

Indicative market price used for information purposes.

A recovery in price after a period of decline.

The price level where a currency has difficulty strengthening thus may begin weakening as a result.

A monthly economic indicator is compiled and released by the Census Bureau and the Department of Commerce. Measures sales of all goods and services sold by retailers for the previous month.

Exposure to uncertain change in the market.

Utilization of analysis and products to reduce/ control exposure to risk.

Currency that is viewed as stable enough to keep its value relative to other currencies in times of economic uncertainty.

Investment positions that benefit from a decline in market price; for example, when the base currency is sold, the position is short.

The current exchange rate that a currency pair can be bought or sold at.

Purchase/ sale of currency for immediate delivery, as opposed to sometime in the future.

This is a nickname for the GBP/USD currency pair.

Type of market order to buy or sell currency at a predefined level in order to limit a loss.

Opposite of a resistance level; price level where a currency has, historically, had difficulty falling past.

Type of market order to buy or sell currency at a predefined level in order to secure a profit.

The process of reviewing past price patterns for clues as to the direction of future price movements.

Measure of the total workforce that is unemployed and actively seeking employment.

Also referred to as the maturity date. The delivery date of funds traded; for spot trades, it is normally two days after the transaction date.

Degree of change in the value of a currency over time. For example, high volatility is associated with a high degree of risk.

Percentage return from an investment.