The general convention in FX markets is that a currency quote is given as the number of units of the quoted currency per one unit of the base currency, but how do market practitioners decide which currency is the quoted currency and which is the base currency in a given pair? The answer is that while we can't know all currency pair conventions off hand, there are a few key rules that would help you a great deal.
Let's explore these rules, which are often referred to as the FX quote waterfall because they explain the hierarchy for how currencies are positioned in a pair when traded. At the top of the waterfall, Euro is always the base currency. This means that whenever the Euro is part of any currency pair, it is always quoted first, regardless of the other currency.
Next, we have Great British Pound, then Aussie Dollar, and then New Zealand Dollar. These currencies are always the base when traded against any currency except the Euro. For example, British Pound, US Dollar, Aussie Dollar, Japanese Yen, and New Zealand Dollar, Canadian Dollar all follow this rule. Great British Pound will be the base currency against Aussie Dollar and New Zealand Dollar and Aussie Dollar will be the base against New Zealand Dollar.
The third level of the hierarchy is the US Dollar. The US Dollar is the base currency when traded against any currency except for Euro, British Pound, Aussie Dollar, and New Zealand Dollar. For instance, you will see US Dollar, Japanese Yen, or US Dollar, Swiss Franc. However, when US Dollar is traded against the Euro, the British Pound, Australian Dollar, or New Zealand Dollar, it becomes the quoted currency instead. Finally, if a pair does not include any of the currencies mentioned above, the stronger currency typically becomes the base currency. Strength in this context often refers to higher perceived value, economic stability, or liquidity. For example, if we consider exotic currencies or emerging market pairs, the currency with a higher perceived value or market strength usually comes first in the quote.
