Base and Counter Currency

One currency in a currency pair is always dominant. It is called the Base Currency. The base currency is identified as the first currency in a currency pair.

It also is the currency that remains constant when determining a currency pair's price.

The Euro is the dominant base currency against all other global currencies. As a result, currency pairs against the EUR will be identified as EUR/USD, EUR/GBP, EUR/CHF, EUR/JPY, EUR/CAD, etc. All have the EUR acronym as the first in the sequence.

The British Pound is next in the hierarchy of currency name domination. The major currency pairs versus the GBP would, therefore be identified as GBP/USD, GBP/CHF, GBP/JPY, GBP/CAD. Apart from the EUR/GBP, expect to see GBP as the first currency in a currency pair.

The USD is the next dominant base currency. USD/CAD, USD/JPY, USD/CHF would be the normal currency pair convention for the major currencies.

Since the EUR and the GBP are more dominant in terms of base currencies, the dollar is quoted as EUR/USD and GBP/USD.

Knowing the base currency is important as it determines the values of currencies (notional or real) exchanged when a foreign exchange deal is transacted.

The Counter Currency is the second currency in a Currency Pair notation.