Forex Minor Currency Pairs

Minor currency pairs don't offer quite the same levels of liquidity as majors but they still feature some of the world's largest currencies. Read on to find out more about these pairs, including common examples as well as the factors that can influence their movements.

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Minor currency pairs: What to expect from our guide

• What are minor currency pairs?
• How are minor currency pairs different from major currency pairs?
• How do minor currency pairs work?
• What are the minor currency pairs?
• What affects the prices of minor currency pairs?
• What are the advantages of trading minor currency pairs?
• What are the risks of trading minor currency pairs?
• Learn more about minor currency pairs and start trading with Tradu

What are minor currency pairs?

A minor currency pair is typically defined as one that does not include the US dollar (USD) but still features two other major global currencies, such as the euro (EUR) or the British pound (GBP). They are extremely popular among traders all over the world, with daily turnovers exceeding hundreds of billions of dollars, but they are not traded with the same frequency as the majors. They are sometimes referred to as cross-currency pairs, or crosses.

How are minor currency pairs different from major currency pairs?

The fundamental difference between major and minor currency pairs is in their composition. As we've previously touched upon, major pairs are made up of the USD combined with another premier global currency. Examples include:

• The US dollar and the euro (USD/EUR)
• The US dollar and the British pound (USD/GBP)
• The US dollar and the Japanese yen (USD/JPY)
• The US dollar and the Swiss franc (USD/CHF)

Find out more in our guide to major currency pairs

And there are other key differences between major and minor currency pairs. It's important to understand what these are and how they might impact your trading strategy. For example:

• Volatility: Minor currency pairs tend to offer greater levels of volatility than majors. This can create opportunities in the form of greater returns but, as with any form of trading, it also means that there is the potential to make significant losses.
• Liquidity: Although still relatively liquid, minor currency pairs do not offer as much liquidity as majors. This can make it slightly harder to enter or exit positions as there may not be as many traders looking to buy or sell at that price.
• Spreads: Because they are traded in lower volumes, minors typically come with higher spreads than major pairs. This will increase the cost of your trading.

Read our guide to the differences between major and minor currency pairs

How do minor currency pairs work?

As with any other pair in the forex market, minor currency pairs display the value of one currency in relation to another. The prices shown will tell you how much of one currency (known as the quote currency) it would take to purchase one unit of the other (known as the base currency). If we take the example of EUR/GBP, then, EUR is the base and GBP is the quote. If one of the currencies in a minor pair experiences a fluctuation in its value, that change will be reflected in the prices shown.

What are the minor currency pairs?

There are a number of different pairs that you can include in your portfolio but, in a list of minor currency pairs that prove the most popular among traders, the following will always feature prominently:

• EUR/GBP: Known as 'Chunnel' – in reference to the Channel Tunnel between Europe and Great Britain – this minor currency pair reflects the relationship between two closely linked economies. The EUR/GBP pair experienced major volatility as a consequence of the Brexit vote and the UK's subsequent departure from the European Union.
• EUR/CHF: The franc is seen by many traders as a safe-haven currency that offers stability in times of economic uncertainty elsewhere. Its price was even pegged to the euro between 2011 and 2015.
• EUR/JPY: Nicknamed 'Euppy' or 'Yuppy', average daily turnover in this minor currency pair exceeds £100 billion, according to the latest data from the Bank for International Settlements.
• AUD/JPY: With an average daily trading volume of $37 billion, this is among the most popular minor currency pairs. The value of the Australian dollar is heavily linked to the performance of the country's mining and agricultural commodities.

What affects the prices of minor currency pairs?

Before adding minor currency pairs to your trading portfolio, you need to be aware of the factors that can influence their fluctuations. The below will inform your fundamental analysis, which should be used in combination with technical analysis in order to shape your decisions.

• Monetary policies: Central banks are responsible for controlling interest rates and releasing other monetary updates that will impact a nation's economy and the strength of its currency.
• Economic data: The likes of GDP, inflation rates, employment figures, retail sales and import/export figures are all key indicators to monitor.
• Geopolitics: Elections, wars, policy updates, governmental changes and general political instability can all have an effect on a country's economic status.
• Weather events: Natural disasters such as earthquakes, tsunamis or tropical storms can cause significant financial damage as well as on a human level. Japan, for instance, is particularly susceptible to these events due to its geographical location.
• Trader sentiment: Ultimately, the performance of any minor currency pair will be subject to the levels of supply and demand among traders around the world.

What are the advantages of trading minor currency pairs?

• Leverage: You can use leverage to trade minor currency pairs in the forex market. This enables you to take up larger positions for only a proportion of the capital you would require in a conventional trade. This offers the opportunity to amplify your profits.
• Trade both ways: Derivative products like contracts for difference (CFDs) mean that you can trade minor currency pairs without taking ownership of the underlying asset. Instead, you are simply speculating on the pair's performance – in either direction. This means that you can make profits in both bullish and bearish markets.
• News coverage: Even though they're called minor currency pairs, the most popular feature some of the world's premier currencies. There is ample available information on those countries and the factors that impact their economies, which makes it easier to conduct your fundamental analysis.
• Volatility: Minor pairs tend to offer greater volatility than major pairs, which feature the traditionally more stable USD. Those significant price movements, if in your favour, can lead to profits.

What are the risks of trading minor currency pairs?

• Leverage: The flip side of trading on leverage is that, if the market moves against you, your losses will be amplified. That's because you are exposed for the value of the full position, not just your initial outlay.
• Spreads: The spreads on minor currency pairs are typically higher than those for major pairs. This will increase your cost of trading and eat into any potential profits.
• Volatility: While greater volatility can mean increased opportunities for profits, it can also heighten your risk of making a significant loss if a trade does not work out as you predicted.
• Liquidity: Minor currency pairs are not as liquid as the major pairs, which can make it more difficult to enter and exit positions as and when you need to do so.

Learn more about minor currency pairs and start trading with Tradu

You can trade minor currency pairs in the forex market with Tradu. Our proprietary platform offers access to hundreds of different pairs as well as an extensive suite of tools and live charts to inform your analysis. It takes just a few minutes to open an account while you can also check out our related guides on currency pairs and forex trading.

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