These Are The Best Hours To Trade the British Pound

The British pound sterling (GBP) stands is the fourth most widely traded currency in the world, behind the U.S. dollar (USD), euro (EUR) and Japanese yen (JPY), and ranks third in globally held reserves. GBP traders speculate on strength and weakness through currency pairs that establish comparative value in real time. Although forex brokers offer dozens of related crosses, most clients focus their attention on the four most popular pairs:

• U.S. dollar: GBP/USD
• Swiss franc: GBP/CHF
• Japanese yen: GBP/JPY
• Euro: EUR/GBP

The GBP trades continuously from Sunday evening to Friday afternoon in the United States, offering significant opportunities for profit. However, volume and volatility vary greatly in each 24-hour cycle with spreads widening in quiet periods and narrowing in active periods. While the ability to open and close positions at any time marks a forex benefit, the majority of trading strategies unfolds during active periods.

The best times to trade this instrument track the release of key economic data as well as open hours at equity, options and futures exchanges. Planning ahead for these releases requires two-sided research because local (United Kingdom) economic news can move popular GBP pairs with the same intensity as economic news in each of the cross venues.

In addition, the pairs are highly susceptible to economic and political macro events that trigger highly correlated price action across equities, currencies and bond markets around the world. China’s devaluation of the yuan in August 2015 offers a perfect illustration. (For more details, read: GBP/USD consolidates around 1.57, Chinese equities rally). Even natural disasters have the power to generate this type of coordinated response as evidenced by the 2011 Japanese tsunami.

The majority of United Kingdom monthly economic data is released at 1:30 am Eastern Time in the United States with the majority of mainland Europe data coming a half hour later, at 2:00 am. Thirty to 60 minutes prior to these releases and one to three hours afterwards highlight the best times to trade the GBP because the news flow will impact at least three of the four most popular currency pairs.

U.S. economic releases centered at 8:30 am and 10:00 am Eastern Time generate extraordinary GBP trading volume also, with high odds for strongly trending price action in several or all of the pairs. (For more details, read GBP/USD drops, US 2-yr treasury yield rises after the GDP report). Japanese releases receive less attention because they are centered at 4:30 pm and 10:00 pm when the United Kingdom is in the middle of its sleep cycle. Even so, trading volume with the GBP/JPY pair will spike sharply around these time zones.   

The schedules for many GBP traders roughly follow exchange hours centering their activity when Frankfurt and New York equity markets and Chicago futures and options markets are open for business. This localization generates an increase in trading volume around midnight on the U.S. East Coast, continuing through the night and into the American lunch hour when forex trading activity can drop sharply.

However, central bank agendas shift this activity cycle with forex traders worldwide staying at their desks when the Federal Reserve (FOMC) is scheduled to release a 2:00 pm interest rate decision or the minutes of the prior meeting. Bank of England (BOE) issues its rate decisions at 7:00 am, while the European Central Bank (ECB) follows at 7:45 am with both releases taking place in the dead center of high volume GBP activity.

Four popular currency pairs offer British pound sterling traders a wide variety of short and long-term opportunities. The best times to trade these instruments are centered around key economic releases at 1:30 am, 2:00 am, 8:30 am and 10:00 am U.S. Eastern Time, as well as between midnight and noon, when European and American exchanges keep all cross markets active and highly liquid.