What is foreign exchange?
FX is a financial transaction where money is converted from one currency to another. This is the case, for example, of an international transfer made from Spain to a non-Eurozone country, when a bank customer goes to his bank to buy money in a different currency or when you pay with your card in a country that does not use the Euro as legal tender.
This operation involves an exchange rate, i.e. the price of one currency in relation to another. This rate is an indicator that expresses how many units of one currency are needed to buy one unit of the other. When a currency exchange is carried out, this exchange rate is applied.
For example, imagine you want to convert euros to dollars to travel to the United States. The EUR/USD exchange rate is 1.20, which means that 1 euro is equivalent to 1.20 dollars. In this case, if you want to exchange 1,000 euros for dollars, the bank will give you 1,200 dollars.