Here is a glossary of some of the terms used in the money markets. Some link to pages in the Jargon Buster section that provides further information on selected entries.

Basis Point: One basis point equals 1/100th of one percent, or .0001.

Bear Market: Markets characterised by declining prices.

Bid: The rate at which a dealer is willing to buy a currency.

Big Mac Index: See Jargon Buster Entry...

Broker: A Broker acts an intermediary between a buyer and a seller.

Bull Market: Markets characterised by rising prices.

Cable: Slang for sterling/US dollar exchange rate.

Drawdown: When a contract is settled fully or partially before the original agreed date.

ECB: The European Central Bank is the organisation that manages the Euro and European interest rates and monetary policy.

Exchange Rate Risk: Potential loss that could be incurred from movement in exchange rates.

Fed: The Federal Reserve is the United States’ central bank.

Forward Contract: A contract to purchase currency at a given rate for a date in the future.

Hedging: A transaction that protects an asset or liability against a fluctuation in the foreign exchange rate.

Interbank Rate: The price at which Major Banks buy and sell currency.

Limit Order: An order to purchase currency at a specified rate of exchange.

Maradona Theory: See Jargon Buster Entry...

Margin: Deposit for a forward contract.

Maturity: Date of settlement.

Mid-Market Price: The price calculated as the mid point between the Bid and Offer price.

MPC: The Monetary Policy Committee is a Bank of England committee that meets monthly to decide the official interest rate in the United Kingdom.

Offer: The rate at which a dealer is willing to sell a currency.

Pip: One Pip is the smallest measure of price used in foreign exchange currency pairs, e.g. the difference between 1.4699 and 1.4700 is a pip. Also sometimes called a Tick.

Point: 100 Pips. The difference between a rate of 1.4610 and 1.4710 is one Point.

Resistance: A price level at which you would expect selling to take place. Tends to prevent rates rising any further.

Rollover: Where the settlement of a deal is rolled forward to another value date.

Settlement: Actual physical exchange of base currency between principal and client.

Spot: Quoted for immediate settlement, usually two business days from trade date.

Spread: The difference in prices between Bid and Offer rates.

Stop: Acts a safety net; it is a minimum trading level set to reduce exposure.

Support: A price level at which you can expect buying to take place. Tends to prevent rates falling any further.

Value Date: Settlement date of a spot of forward deal.