Why when a currency makes a move does it make a move across the board?

But at one time someone must have said, right all the US banks have 2x billion in gold. the UK has 1xbillion in gold therefore we work out the exchange rate to be 2:1.
The rate must come from a comparison of something?

Answer below but how is this calculated by a totalling of bank’s wealth in each country?

There are various factors that determine an exchange rate. Trade value, inflation, and interest rates, to name a few. These are basic principles to help understand the concept.

Let’s work in a closed vacuum and assume there is no inflation between two countries or any other factors and examine fluctuations based on wealth and trade.
We begin with country A, which lets call the USA and country B which we call Britain. Lets imagine that 1 UD Dollar = 1 British Pound.

Now let’s say that the Americans own \$100 and the British own 100 Pounds. If America buys \$5 worth of product from Britain, America would have \$95 and Britain would have 105 Pounds. Suddenly Britain becomes wealthier. In theory Britain is approximately 10% wealthier now. (100/95x105=10.52%) So suddenly \$1 would be worth around 1 Pound and 10 Pence.

This is the principle of trade surpluses and trade deficits and wealth within a currency.

Now let’s imagine that America and Britain each have \$100 again. Let’s say that over 1 year, prices in America stayed the same but in Britain, prices went up 5%. We would now have an effect where Britain is 5% poorer then America and \$1 would be now worth 1 Pound and 5 Pence. This is where interest rates are determined. Britain could have helped keep \$1 worth 1 Pound by having an Interest rate of 5%.

Interest rates are determined normally by a Reserve Bank governor that determines economic policy for a currency. Interest rates can also be manipulated to stimulate an economy by strengthening or weakening a currency.

Now we can also consider what would happen if Britain deicide to print twice as much money as it had before. If America and Britain each has \$100 and 100 Pounds each respectively, and Britain decided to print 200 Pounds in an attempt to get wealthier, suddenly \$1 would equal 50 pence. However if Britain had found 100 Pounds of gold and was worth 200 Pounds, then \$1 would still equal 1 Pound.

Very basically, this is how the system works, however is much more complex in reality. [/B]

However,
the Americans own \$100 and the British own 100 Pounds. If America buys \$5 worth of product from Britain, America would have \$95 and Britain would have 105 Pounds. Suddenly Britain becomes wealthier. The Canadian however didn’t want anything from the UK, so the Canadian keeps his CAD100 and the Britain doesn’t want anything from the Canadian. So, why does the GBPCAD exchange rate change? They haven’t invested anything in each other.

It’s not just the amount of gold. It’s also the amount of money. If the US has twice as much gold as the UK, but has 4 times the money supply (meaning there are 4x as many USD in the system as GBP) then the two currencies would theoretically be valued the same.

However, the Americans own \$100 and the British own 100 Pounds. If America buys \$5 worth of product from Britain, America would have \$95 and Britain would have 105 Pounds. Suddenly Britain becomes wealthier. The Canadian however didn’t want anything from the UK, so the Canadian keeps his CAD100 and the Britain doesn’t want anything from the Canadian. So, why does the GBPCAD exchange rate change? They haven’t invested anything in each other.

Let’s say USD/CAD was 1 as well. Thus GBP/CAD was also at 1 to start.

To continue using this example, if the UK has 105 and the US has 95 and Canada remains at 100 after this trade transaction, then the GBP has 5% more value than the CAD. The result will be the that USD/CAD will fall to 0.95 and GBP/CAD will rise to about 1.05.

Found this interesting article by googling “History of currency trading”

The History of Currency Trading | Converter-Currency.com

Interesting article, I enjoyed reviewing it thanks!!!

So, is the market completely moved by traders or is it moved by banks filling orders for say meat exports from the US, etc.?

On a related note, if every trader in the world went long and short at the exact same times would everyone make money? I suspect the answer is no as for every seller there needs to be a buyer?

Traders actually represent a realtively small portion of the forex market. The biggest part of the volume (especially in the London market) is in currency swaps, which are international trade/capital related.

On a related note, if every trader in the world went long and short at the exact same times would everyone make money? I suspect the answer is no as for every seller there needs to be a buyer?

Actually, everyone would lose because of the spread. Only the market makers would profit.