FX Spreads Explained

The FX spread is the difference between the buy price and sell price of a currency. It's the primary way exchange providers make money — and the biggest cost you face when converting currencies.

How Spreads Work

Every currency has two prices: the bid (what someone will pay to buy it) and the ask (what someone wants to sell it for). The gap between these is the spread. A tighter spread means lower cost for you.

For major pairs like EUR/USD, the interbank spread can be as low as 0.0001 (one pip). By the time it reaches retail customers, providers widen it — sometimes dramatically.

What Affects Spread Size?

• Currency popularity — Major pairs (EUR/USD, GBP/USD) have tighter spreads than exotic pairs (USD/TRY, GBP/THB)
• Market volatility — Spreads widen during high volatility, economic announcements, or geopolitical events
• Time of day — Spreads are tightest when major financial centres overlap (London + New York, 1pm-5pm GMT)
• Provider type — Online providers typically offer tighter spreads than physical bureaux
• Transaction size — Larger amounts may qualify for better rates from some providers

Spread vs Commission

Some providers charge a visible commission plus a tighter spread, while others charge no commission but widen the spread. Neither model is inherently better — what matters is the total cost. Always compare the final amount you'll receive, not just the headline rate or commission.