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I have a special effects pedal that plays up to 150 sounds. I also have a cheap Squire electric guitar that cost under $200.00 (150LBS) does it matter that much if I have a cheap guitar, or is there something else I am not taking into account?

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The bottom line is that "you get what you pay for."  A high-end guitar will sound better than a cheap knock-off every time.

HOWEVER... that being said, there are a number of ways to get the best sound out of your low-end guitar, such as buying thicker strings (improves sustain), changing strings regularly (about every 100 hours of playing time), and getting an FX pedal, as you have done.  

Here's a pretty good article about how you can make your low-end guitar sound better:

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