What is a Basis Point?

In financial terms, a basis point is one percent or one hundred pips. For example, having a quote of 1.3493 EUR/USD - to move one basis point the currency would need to increase by 100 pips. So a move from 1.3493 to 1.3593 would be a move by one basis point.

Another example of a financial rates variation is when the interest rate is pushed higher by one percent (1%). In basis points, such a movement is called 100 basis points. Therefore a 0.25% increase or decrease is a 25 basis point move. Sometimes market commentators comment that the federal bank have raised rates by a quarter of a basis point, meaning the interest rate was hiked up by a quarter of a percent.