DEFINITION of the cable
Cable is a foreign exchange term using for the GBP/USD currency pair rate (British pound price in US dollars).
WHAT IT IS IN ESSENCE
The term dates back to the 19th century when transactions between the British Pound and the US Dollar were executed through the transatlantic line.
The cable is a slang term that forex traders use to refer to the exchange rate between the pound and dollar. And it also simply refer to the British pound itself. Other currency pair nicknames include the loonie, for the Canadian dollar against the US dollar, and Swissy, for the Swiss franc against the US dollar. The majority of nicknames are for currencies against the US dollar because it is the most commonly used quote currency.
The Great British Pound (GBP) is the world’s oldest currency and is one of the most liquid markets in the world. The pound versus the US dollar (GBP/USD) is one of the most traded currency pairs. So the nickname ‘cable’ is popular in financial firms, trading rooms, and market journalism.
The nickname ‘cable’ dates back to the 1800s. In the time when the exchange rate between the US dollar and the British pound was transmitted across the Atlantic by a large wire. It ran across the ocean floor between the two countries. Before the invention of the radio, the only possibility of “fast” communication between America and Great Britain was through a transatlantic telegraph wire.
HOW TO USE
Today, the Cable is still very relevant — it is the third most traded currency pair in the world behind the EUR/USD and the USD/JPY.
This term is in a strongly positive correlation to the world’s most popular currency pair. This is the reason that many traders decide not to trade on both of these markets at the same time. Because there is a probability that both markets will move in the same direction.