When Spreads Widen — and Why It's Predictable

The short answer

Spreads widen around scheduled releases, at session handovers, during the daily rollover window and on thin holidays — and almost all of that is knowable in advance. The advertised figure is a typical value observed in good conditions, not a commitment, and the widening is worst exactly when you most want to act.

A broker's homepage shows a spread. It is usually accurate, and it is usually a typical or minimum value observed when conditions are good. It is not a promise, and the conditions are not always good.

Spreads widen. The useful fact about this — the one that turns it from a grievance into something you can plan around — is that most of the widening happens at times you could have written down in advance.

Why anyone widens a quote

Someone has to be willing to stand on both sides of a market. They make the spread and they carry the risk of being left holding something they cannot pass on.

When the next move is genuinely unknown, that risk goes up sharply. The rational response is not to stop quoting but to quote defensively: wider, so the compensation matches the risk of being caught on the wrong side of a move nobody has seen yet.

That is the whole mechanism. Widening is not punishment and it is not a tariff applied to retail accounts. It is what a reasonable participant does when asked to guarantee a price across an event they cannot see past.

The predictable moments

Scheduled economic releases. The spread typically begins widening in the minutes before and is at its worst in the seconds around the number. This is the clearest case, because the time is published weeks ahead.

Session handovers. Markets are a relay between financial centres. Around the handovers — and particularly in the window after one major centre's main hours end and before the next begins — fewer participants are active and the book thins.

The daily rollover. Most brokers have a cut-off at which positions are rolled and financing applied. Spreads commonly widen around it, often sharply, for a few minutes.

Weekend opens and public holidays. A market reopening after a closed period reopens on whatever happened during it. Quotes are defensive until the picture settles, and a holiday in a major centre thins the book for the whole day.

Anything unscheduled. This is the exception that matters. A genuine surprise widens spreads precisely because nobody saw it coming — and that is the moment you are most likely to want out. Here, nothing in this article helps you.

Where depth comes from

The reason the same instrument behaves so differently at different hours is participation, and the scale of that participation is lopsided.

The Bank for International Settlements' Triennial Survey put average daily turnover in over-the-counter foreign exchange at 7.5 trillion US dollars per day in April 2022, with the US dollar on one side of 88% of all trades and the euro on one side of 31%.

That concentration is the practical point. Activity is not spread evenly across instruments or hours, and quoting behaviour follows it. An instrument on the busy side of that distribution, during the hours when its main centres are open, is quoted by many participants and shows narrow spreads. The same instrument at a quiet hour is quoted by fewer, and an instrument that was never on the busy side is quoted defensively most of the time.

That figure is a daily average for April 2022, net of inter-dealer double-counting. It describes the shape of the market, not the spread you will see today.

What this is worth to you

The ledger on this site marks spread widening as genuinely reducible, which is a stronger claim than it makes about almost anything else. The reasoning is simple: if most of the widening occurs at times that are published in advance, then most of it is avoided by not trading into those times unless the timing is the point.

That carries a real caveat. Sometimes the release is the trade, or a position has to be closed now regardless. Then you pay the wide spread, and that is a legitimate cost of a deliberate decision.

What is not legitimate — or at least, not necessary — is paying it by accident. Placing a routine entry two minutes before a scheduled number, with no view on the number, is buying the worst price of the day for nothing.

The practical version: know when the releases are for what you trade, know when your broker's rollover is, and know which hours your instrument is actually liquid. Three things, all knowable, all free.

One thing worth checking about your own broker

Widening is normal. Widening far beyond what comparable firms show, at ordinary times, is a different matter.

The way to tell is to record what you actually see — the spread at the hours you actually trade, over a few weeks — rather than to compare your memory of a bad fill against a figure on a marketing page. A quiet Tuesday afternoon reading is far more informative than a dramatic one, because the dramatic ones are wide everywhere.

Where this sits

This is the variable half of the spread, and you can see where the spread sits among the other costs. The same hours thin the book — see liquidity.