Let's have a look at how FX rates are quoted in the spot market. Before having a look at the actual quote though, there are few rules we should be familiar with. First, every currency is referred to by three letters in the FX market, the so-called currency ISO codes, ISO standing for the International Organization for Standardization. And while there is a large number of these codes as you can imagine, here are a few you should be familiar with. USD stands for US dollar, EUR for euros, JPY for Japanese Yen, GBP for pounds sterling, CHF for Swiss Francs, AUD for Australian dollar, CAD for Canadian dollar, and NZD for New Zealand dollar. And as currencies are priced in relation to another currency, they're always quoted in pairs. As for example, currency A is worth x units of currency B, and the convention is to quote currency A first when referring to the currency pair. So if we have a quote of euros versus US dollars at 1.1325 this means that one euro is worth 1.1325 US dollars. The currency mentioned first in the quote is also referred to as the base currency. The second currency is called the quoted currency. Here are a few of the most important pairs that are traded in the FX markets. Euros versus US dollars, US dollars versus Japanese yen, pounds sterling versus US dollars. This pair, by the way is often referred to as "cable," in reference to the transatlantic cable between the two countries. US dollar versus Swiss francs, et cetera. Now, as we can see in all these pairs, the US dollar is one of the involved currencies. However, in some pairs, US dollar is the base currency, in other pairs, it is a quoted currency. As a rule of thumb, we can say that as USD is the most important currency, it is generally the base currency in a currency pair. So the quote is the value of one US dollar in units of the foreign currency. However, euros, pounds sterling, Australian and New Zealand dollars are the exception. When quoted against US dollars, these currencies are the base currencies. Although USD is the dominating currency in FX markets, market participants also regularly transact in currency pairs that do not include USD, like for example, euro-yen, pounds sterling-yen, et cetera. And in these cases, the pairs are generally referred to as "cross rates" or "crosses." For cross quotes, the overall quotation conventions apply as well. The first currency in the pair is a base currency, the second one, the quoted currency, and the rate is quoted as number of units of quoted currency per unit of the base currency. However, for many crosses, there are no general rules which currency should be the base, and which one should be the quoted currency. So the actual quotation might depend on the individual local market. And in this context, we can generally distinguish direct quotes from indirect quotes. In case of a direct quote, the domestic currency is a quoted currency, so it is expressed how many units of local currency have to be paid per unit of foreign currency. In case of an indirect quote, it's just the other way around, and the domestic currency is a base currency. In other words, the quote shows the number of units of the foreign currency that have to be sold for one unit in the domestic currency.