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Forex cross, where am I losing the plot

Perhaps someone can explain to me where I'm going wrong.

Daily, OANDA send me a cross table of selected currencies, take Thursday 06 December 2012, prices are ask at cash rate:

EUR/GBP = 0.7793

Therefore 1 Euro buys 78 pence

To calculate GBP/EUR I would apply the formula 1/0.7793

This gives me 1 Pound buys 1.28 Euros 

YET on the same cross table 1 Pound buys 1.19 Euros

What happened to the other 9 Cents?

Where have I lost the plot?

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08th Dec 2012 10:36

Forgotten Bid/Ask spread

The buying and selling prices (ask and bid on Oanda) will always be slightly different from one another. For example, at the moment, if I sell a pound I will get 1.60381 US dollars, but if I want to buy a pound it will cost me 1.60401 US dollars. Brokers make profits from this spread when they are not able to charge commission on deals.

This article on the spread refers to stocks but the principle is the same.

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By BKD
08th Dec 2012 11:19

As stepurhan says

Forex rates are more than simple arithmetical equations, they actually mean something in the real world, so it is a fallacy to take the inverse of the exchange rate in one direction to find out what the rate would be in the other. Yes, you'll get close but it will never be the same.

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Forex cross, where am I losing the plot

Thanks or the replies;

stepurhan, both prices are ask so I can take the bid / ask difference out of the equation.

BKD, so depending on whether I'm exchanging GBP for USD, or, USD for GBP, both buying, there could be a difference.

I'ts just the first time that I've come across this difference. On other sites the sum works fine.

Paul.

 

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20th Dec 2012 08:35

Interesting

Looking at the historical OANDA rates for 6 December, the relationship is as you would expect for both USD and EUR to 3 dp. As is the live exchange rate as I type (€:£ 0.813, 1.2298).

So perhaps some rogue data, quoted at different times in the day or some sort of spread (though I know you say this has been eliminated)?

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Thanks, paulwakefield1, Perhaps, as you say, I'm getting DUD data?

 

 

Crossrate Table for Tue Dec 18 20:23:09 2012    Price is ask       Cash Rate       ISO CodeCurrencyEURGBPUSD InverseResultDifferenceEUREuro-0.7821.268 1/0.7291.372-0.104GBPUnited Kingdom Pound1.183-1.560 1/0.5931.686-0.127USDUS Dollar0.7290.593-    

I've sent this table to the "contact us" facility on their site, I'll post the answer if I get one.

Paul.

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