There are a lot of technical terms and data which is usually associated with currency markets and the financial markets as a whole, which are very informative when you have been working in the industry for a while and have picked up the financial lingo. However for everyone else, it might has well be in a completely different language. I have been working in the financial world for a little while now and it has taken considerable effort and research to understand what these terms mean. I work for a company called FX Compared; it’s the leading price comparison website for foreign exchange. We do a daily market report to highlight the most important goings on each day and it has come to my attention that this might not mean that much to most people.

The currency markets are based on a very short term basis and are likely to have more impact on your everyday lives as opposed to the stock or bond markets. Whether you are going on holiday, sending money to friends abroad or emigrating, the exchange rate will denote how much money you and/or your friends will receive. With this in mind, here are some of key things to remember when looking at these kinds of reports:

‘Rallying’: If one a currency is rallying against another, this means that the currency is performing better against its counterpart and hence has more buying power. Example: If Sterling (GBP) is rallying against the US Dollar (USD) you will be able to get more US Dollars for every pound that you have. Therefore if the exchange rate changes from 1.5 to 1.75, for every £100 you $175 instead of $150.
‘Reaction’: Is the opposite of a rally and therefore (in our example) you will have US Dollars to spend for every pound you convert.

(Although the specific terms may not be that important, the movement of the currency could have a dramatic effect. This is especially apparent when purchasing property abroad, as on a number of occasions the exchange rate may result in you having €20,000 less than you envisaged for your dream home.)

‘Cable’: is another expression for the conversion from GBP to USD.
‘Interbank rate’: Is the rate at which banks buy and sell currency. Billions of dollars are traded each day by banking corporations. When individuals buy currency it is offered at a margin off the interbank rate so that banks and other financial institutions make a profit from selling you this currency.
‘Bullish’ or ‘Bull market’: If a particular currency is described as bullish, this means that investors are buying lots of that particular currency, and as a result that currency will perform favourably. So if we go back to the example of GBP/USD, if the market is bullish GBP that will mean you can buy more US Dollars for every pound and vice versa.
‘Bearish’ or ‘Bear market’: This is the opposite of a bull market, meaning investors are selling or looking to sell a particular currency.

(The ‘Bull’ and ‘Bear’ markets not only apply to currency but other securities such as stocks and bonds as well as entire markets.)

‘Forward Contract’: This where you can order foreign currency for a fixed rate in the future. This is usually available for large transfers. The benefits of a forward contract are that if you think that the current exchange rate is favourable but you want to make the transaction sometime in the future you can use a forward contract, there may be a slight premium to use these services but is still likely to save you money.
‘Limit Order’: If you have a specific rate in mind for which you would like to carry out your transaction, you can place a limit order. This is so that when it gets to your desired level your account manager can carry out the transaction.

The use of forward and limit order contracts are usually done through foreign currency specialists. Foreign currency specialists are a very realistic alternative to using your bank for transferring larger amounts of money (usually over £5000 in the UK). FX Compared advocate the use of foreign currency specialists as the margin that they offer is much closer to the inter-bank rate than that which your bank will offer you. They also charge little or no fee for their services whereas banks may charge upwards of £40 for a single transaction.