A currency pair consists of two different currencies that are traded in the foreign exchange market. The first currency listed is known as the base currency, while the second is the quote currency. The exchange rate represents how much of the quote currency is needed to purchase one unit of the base currency. Common examples include EUR/USD (Euro to US Dollar) and GBP/JPY (British Pound to Japanese Yen). Currency pairs can be classified into major, minor, and exotic pairs, depending on their liquidity and the economies involved.