Why is the GBP/USD Currency Pair Known as Trading the Cable?
The slang term “trading the cable” is used by forex traders to refer to an exchange between British pounds and U.S. dollars. The word cable may refer to the exchange rate between the pound and the dollar, and may also simply refer to the British pound.
Key Takeaways
- When the currency pair is the British pound and the U.S. dollar, the exchange may be called “trading the cable.”
- The British pound is sometimes known as “the cable,” but only when it is paired with the U.S. dollar.
- The slang dates from the days of the transatlantic cable that enabled faster communications between London and New York.
Cable Lingo
The term has its origins in the mid-19th century when transatlantic telegraph service revolutionized international communications. Messages between New York and London could be transmitted by a physical cable that stretched across the ocean floor between the two nations. This novel idea was proposed as early as 1840 and was attempted in the 1850s. It was some years before reliable transatlantic service was in place.
Since that time, the exchange rate between the British pound and the U.S. dollar has been referred to as the cable. The British pound/U.S.dollar currency pair continues to be one of the most widely-traded currency pairs in the world.
The British pound is normally referred to by its standard abbreviation, GBP, as the dollar is referred to as USD. The pound may be called the cable only when it is paired with the USD, not with any other currency.
Modern Times
The forex, or foreign exchange, is now a global marketplace for the exchange of nearly all global currencies. It has no headquarters or central location.
Currency transactions are conducted electronically between traders around the world, 24 hours a day. Most participants in this market are investment banks or commercial banks, along with some individual currency traders.
