Trading of foreign currencies is always done in pairs where one currency is bought and the other is sold and the prices at which these take place make up the exchange rate.
The base currency is always equal to one unit of that currency. EUR/USD price quotes at 1.12500, Means that €1 equals $ 1.12500
When currency pairs are quoted, a market maker or Fx trader will qoute the ask and bid price. It is difficult to regulate the FX market since it is decentralized and has no physical location. It is an Over the Counter market (OTC) meaning that brokers and dealers negotiate directly with one another. Retailers communicate directly with liquidity providers, like a peer to peer exchange.
The relationship between pairs is explained well in the image below:
