Why is the GBP/USD Currency Pair Known as Trading the Cable?

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Why is the GBP/USD Currency Pair Known as Trading the Cable?

Forex traders use the slang phrase “trading the cable” to refer to an exchange between British pounds and US dollars. The term “cable” may refer to the pound-to-dollar exchange rate, or it may simply refer to the British pound.

Key Takeaways

  • When the currency pair is the British pound and the US dollar, the transaction is known as “trading the cable.”
  • The British pound is referred to as “the cable” when it is connected with the US dollar.
  • The phrase goes back to the days of the transatlantic cable, which allowed for speedier communication between London and New York.

Cable Lingo

The expression “trading the cable” dates back to the mid-nineteenth century, when transatlantic telegraph service transformed worldwide communications. Messages between New York and London could be sent through a physical cable that spanned the ocean bottom between the two countries. This revolutionary concept was conceived in 1840 and tried in the 1850s. It took many years for dependable transatlantic service to be established.

Since then, the cable has been used to refer to the exchange rate between the British pound and the US dollar. The British pound/US dollar currency combination is one of the world’s most traded currency pairings.

The British pound is often abbreviated as GBP, whereas the US dollar is abbreviated as USD. The pound is referred to as the cable only when it is coupled with the US dollar and not with any other currency.

Modern Times

Foreign exchange, or forex, is currently a worldwide marketplace for the exchange of practically all global currencies. It does not have a headquarters or a central location.

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Currency transactions are made electronically between dealers all around the globe 24 hours a day, seven days a week. The majority of market players are investment banks or commercial banks, with some independent currency dealers.

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