The currencies of the world’s major economies comprise most of the forex market’s daily trading volume.
The currency pairs involving these major currencies drive the forex market’s famed liquidity.
As you probably still remember, there are eight major currencies. These are the:
- US dollar (USD)
- Australian dollar (AUD)
- Canadian dollar (CAD)
- New Zealand dollar (NZD)
- British pound (GBP)
- Euro (EUR)
- Swiss franc (CHF)
- Japanese yen (JPY)
In these next lessons, you’ll learn about the countries where these currencies come from and the factors that affect the world’s major currencies.
Lesson Highlights
- There are currently eight recognized major currencies and seven major currency pairs.
- Currency pairs are only classified as major if one of the pairs is the US dollar.
- The US dollar is the world’s most traded currency.
- Europe is the only continent with a common currency, adopted by 19 of its 27 countries.
- The UK is comprised of four semi-autonomous countries: England, Northern Ireland, Scotland, and Wales.
- Canada is the world’s second-largest country in terms of landmass and is the seventh-largest producer of gold.
- Switzerland’s central bank is an active forex participant.
US
The US dollar is the most prominent currency in forex. This denomination is so important that you can only call a currency pair major if one is the US dollar. There was even a brief period in history when most countries pegged their currencies’ values to the USD.
Once a British colony, the US established itself as an economic and military powerhouse after the years following World War 2. This 50-state country boasts of being the world’s largest economy and a major player in the global market.
Today, the United States Federal Bank is one of the most influential participants in the financial markets. Traders everywhere pay close attention to the Fed’s rates and policies.
Here’s some more facts and figures about the land of the free and the home of the brave:
Population: 335,893,238
Density: 34.77 people per square kilometer
Capital City: Washington DC.
Head of Government: President Joe Biden
Currency: US dollar
Main Imports: Consumer goods (automobiles, clothing, medicines, etc.), industrial supplies (crude oil, petroleum, etc.), capital goods (computers, machinery, etc.), agricultural products
Imports From: China ($563.3 billion), Mexico ($454.8 billion), Canada ($436.6 billion), Japan ($148.1 billion), Germany ($146.6 billion)
Main Exports: Industrial supplies, consumer goods, agricultural products, capital goods
Exports To: Canada ($356.5 billion), Mexico ($324.3 billion), China ($150.4 billion), Japan ($80.2 billion), the United Kingdom ($76.2 billion)
Time Zones: GMT -10, GMT -9, GMT -8, GMT -7, GMT -6, GMT -5
European Union
The European Union is a group of countries from Europe, the world’s second-largest continent and once the seat of many empires that controlled the world.
Today, it’s a cultural center and home to the world’s only almost continent-wide currency, the euro. Among Europe’s 44 countries, 19 have adopted the euro as a common currency.
Besides bonding over the common use of the euro, these countries all follow the monetary policies of the European Central Bank (ECB).
Population: 742,272,652
Density: 34 people per square kilometer
Land Area: 4.23 million square kilometers
Member Countries: Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia, and Spain
Head of European Commission: Ursula von der Leyen
Head of European Parliament: Roberta Metsola
Head of European Council: Charles Michel
Currency: Euro
Main Imports: Machinery, aircraft and automobiles, metals, crude oil, chemicals, textiles
Imports From: China, US, UK, Russia, Norway
Main Exports: Machinery, aircraft and automobiles, pharmaceuticals and chemicals, plastics
Exports To: US, UK, China, Switzerland
Time Zones: GMT, GMT+1, GMT+2
United Kingdom
Once part of the EU, the United Kingdom of Great Britain and Northern Ireland made headlines worldwide with the controversial Brexit.
Four countries actually comprise the UK: England, Northern Ireland, Scotland, and Wales. While these countries have varying degrees of autonomy for local matters, the UK’s Parliament governs the country as a whole.
The UK has been a world power since its early days and is the birthplace of the Industrial Revolution. Today, the country ranks fifth globally in terms of economic size.
Population: 67.62 million
Density: 278.05 people per square kilometer
Capital City: London
Head of Government: King Charles III
Currency: British pound or sterling
Main Imports: Machinery, mineral fuels, mechanical appliances and electronic equipment, pharmaceuticals, motor vehicles, precious metals
Imports From: China, Germany, US, the Netherlands, France
Main Exports: Automobiles, crude petroleum, packaged medicaments, gold, gas turbines
Exports To: US, Germany, the Netherlands, Ireland
Time Zones: GMT
Canada
One of the world’s most northernmost countries, Canada is also among the most developed nations globally.
Canada is comprised of ten provinces and three territories, and its landmass is second only to Russia.
The country’s sheer size and geographic location make it rich in natural resources. Canada is the world’s seventh-largest producer of gold and fourth-largest of black gold (oil).
Besides its natural resources, Canada has a healthy service sector that employs three out of every four Canadians. This sector contributes about 70% of the country’s GDP.
The Bank of Canada (BOC) is the country’s primary fiscal authority. Unlike other central banks, the BOC does not have a fixed timeframe for altering its policies. Instead, the BOC’s governing council can make changes to Canada’s monetary policies during any one of its daily meetings.
Population: 40,528,396
Density: 4 people per square kilometer
Capital City: Ottawa
Head of Government: King Charles III
Prime Minister: Justin Trudeau
Currency: Canadian dollar
Main Imports: Automobiles and automobile parts, petroleum, chemicals, electronics, machinery and equipment
Imports From: EU, US, China
Main Exports: Timber, automobiles and automobile parts, industrial machinery, wood pulp, natural gas, petroleum, aircrafts
Exports To: US, China, UK, Japan,
Time Zones: GMT -8, GMT -7, GMT -6, GMT -5, GMT -4
Switzerland
Located right in the middle of Europe, Switzerland is curiously not a part of the European Union. The Swiss are world-famous for many things, such as watches, the Geneva Convention, and offshore banking.
Switzerland’s monetary policies are controlled by the Swiss National Bank (SNB). The SNB has a very active involvement in the forex market as it has to keep the CHF from becoming too strong to prevent inflation.
The Swiss government tries to avoid an excessively strong CHF as it would cause the country’s exports to spike in value, and Switzerland is highly dependent on its export industry.
Population: 8,796,669
Density: 223 people per square kilometer
Capital City: Bern
Head of Government: President Viola Amherd
Currency: Swiss franc
Main Imports: Machinery and mechanical appliances, chemicals and pharmaceuticals, automobiles and automobile parts, minerals, fuels and oils
Imports From: Germany, US, Italy, France, China
Main Exports: Clocks and watches, machinery and equipment, chemicals and pharmaceuticals, textiles and apparels
Exports To: US, Germany, China, Italy, France
Time Zones: GMT +1
Now that you’ve learned about some of the major western economies, you can head on to the next lesson where you’ll learn about the economies of major countries in Asia and the Pacific.
