Definition
A currency pair quotes the price of one currency, the base, in units of another, the quote currency. In EUR/USD the euro is the base and the US dollar is the quote, so a price of 1.2500 means 1 euro costs 1.2500 US dollars.
How it works
Read a pair as base/quote: the price tells you how many quote-currency units one base unit costs. Buying the pair means buying the base while selling the quote currency; selling it does the opposite. When the price rises, the base has strengthened against the quote.
Pairs are grouped as majors (the US dollar against another large currency), crosses (two non-dollar currencies) and exotics (a major with a smaller or emerging-market currency). A cross can be derived from two dollar pairs, and the inverse pair simply flips the quote: USD/EUR is 1 ÷ EUR/USD.
Formula / convention
Quote-currency amount = base-currency amount × pair price; inverse pair price = 1 ÷ pair price; cross rate EUR/GBP = EUR/USD ÷ GBP/USD
Illustrative example
Illustrative: assume EUR/USD is 1.2500. Then 10,000 euros cost 10,000 × 1.2500 = 12,500 US dollars, and the inverse pair USD/EUR is 1 ÷ 1.2500 = 0.8000 euros per US dollar. If EUR/USD later rises to 1.2600, the same 10,000 euros cost 12,600 US dollars.
What to watch for
Check which currency is the base before reading a quote: USD/EUR is the inverse of EUR/USD and moves in the opposite direction. Platforms may also display the same exchange rate in different pair orders.