What Widens Forex Spreads Around Big Economic News

The Quiet Before the Storm

Picture a busy farmers’ market on a calm Saturday morning. There are plenty of vendors, plenty of shoppers, and the price of a basket of apples is pretty much what you’d expect. Now imagine a rumour sweeps through that a hailstorm is about to destroy the orchards. Some stallholders pull their apples off the table. Others ramp up prices. The gap between what sellers want and what buyers are willing to pay suddenly yawns wide open. That, in essence, is what happens to forex spreads when a high-impact economic announcement hits the wires.

In trading terms, the spread is the small difference between the buy (ask) and sell (bid) price of a currency pair. It’s the entry fee for any trade, and it’s usually so tiny you barely notice it. But around events like an interest rate decision or a shock employment figure, that fee can jump fivefold in a heartbeat. This isn’t a glitch, and it’s almost never the broker messing with you. It’s a rational, market-wide response to a sudden drop in certainty.

The Spread Is a Small Number That Punches Above Its Weight

Every time you open a trade, you start a few pips in the red just from the spread. For a long-term investor holding a position for weeks, that’s a rounding error. For a scalper trying to bag a couple of pips, it’s the difference between lunch money and a losing month. Spreads come in two flavours: fixed and variable. Fixed spreads stay put regardless of market turmoil; variable spreads, which most brokers now offer, reflect real-time conditions. When the market is deep and liquid, variable spreads shrink. When it gets nervous, they stretch.

The cost is more than a number on a screen. A wider spread means your stop-loss could get triggered even though the price on your chart never actually traded there. It means your market order fills at a less generous price, and that small slippage adds up. None of this is malicious. It’s just the market doing what it does when certainty evaporates.

The Two Great Spread-Stretchers: Liquidity and Volatility

Spreads widen for two main reasons, and they often happen at the same time. The first is a loss of liquidity—meaning there are simply fewer orders sitting in the market’s order book. When the London and New York sessions overlap, the forex market is a bustling metropolis. By the time New York goes to bed and only the Asian session is stirring, it’s more like a sleepy village. At those moments, spreads naturally drift wider because each trade has to cross a wider gap to find a counterparty.

The second reason is volatility. When prices start jumping around, the institutions that supply buy and sell quotes—the so-called liquidity providers—are suddenly staring at a lot more risk. If they quote a tight price and the market moves against them in a split second, they lose money. So they protect themselves by widening the spread. In effect, they’re saying, “I’ll still make a market, but my uncertainty premium just went up.”

High-impact news releases combine both forces at once. The seconds before a Federal Reserve announcement or a Non-Farm Payrolls print are eerily quiet because many participants cancel their orders and wait. Liquidity dries up. Then the number hits, and prices can gap violently. Spreads often balloon not only at the exact moment of the release but in the cautious minutes before and the turbulent minutes after.

April 2025: A Real-World Stress Test

You don’t need a hypothetical to see this in action. The Bank for International Settlements’ triennial survey captured a vivid example in April 2025, when global forex turnover hit an all-time record of $9.5 trillion per day. A chunk of that—an estimated $1.5 trillion—was extra trading triggered by surprise US tariff announcements and a rare, sharp sell-off in the dollar. Investors who had been under-hedged thanks to years of rising hedging costs suddenly scrambled to protect their dollar exposures using forwards and options. Spot trading surged 42% compared with three years earlier, and options turnover more than doubled.

During those frantic days, bid-ask spreads on major pairs widened noticeably. The market was every bit as volatile as you’d expect, yet it didn’t seize up. One reason, according to the BIS, was that large dealer banks internalised a greater share of their clients’ trades than in the past, matching buys and sells on their own books instead of pushing everything out onto the open market. That quiet plumbing behind the scenes helped keep spreads from becoming even more disorderly. It’s a good reminder: spread widening is not a sign that the market is broken. It’s the market’s way of absorbing a shock while staying open for business.

Why the “Scam Broker” Feeling Is Usually Wrong

Nearly every retail trader has a moment, usually late on a Sunday night or right after the NFP number, when they see their EUR/USD spread jump from 0.2 pips to 3 pips and think, “My broker is shaking me down.” It’s an understandable reaction, but it misunderstands how pricing reaches your screen. Even the most transparent broker ultimately gets its quotes from the same network of global banks and electronic platforms. When those providers widen their prices, the broker displays wider prices—or risks losing money on every trade. There is no hidden hand turning a dial to steal your profits; it’s a chain reaction that starts with genuine, large-scale risk management.

Different broker models handle this slightly differently. An ECN broker passes through raw market spreads, so you feel every ripple. A market maker sometimes smooths things by offering a fixed spread, but that doesn’t make the underlying reality disappear; the broker is absorbing the risk itself and may widen during extreme events anyway. The key is not to look for a broker that magically avoids spread widening, but to understand that widening is a feature of a functioning, decentralised market.

Working With the Weather, Not Against It

You can’t stop spreads from widening around news, any more than you can stop the rain. But you can grab an umbrella. An economic calendar is the simplest tool here. It lists every scheduled release and central bank speech, typically with an impact rating. Before you place a trade, a glance at the calendar tells you whether you’re about to walk into a potential squall. A high-impact release on the US dollar, for instance, will affect not just dollar pairs but gold, indices, and any market closely tied to the greenback.

Some practical habits make spread risk surprisingly manageable. First, note the event window, not just the exact release time. Spreads often begin to widen a few minutes beforehand and may not snap back for a quarter of an hour afterwards. Second, adjust your position size. A slightly lower trade size means a sudden spread spike won’t wreck your account. Third, if you trade with tight stop-losses, accept that a news spike can trigger them without warning. Widening your stops around news events is a common defensive move. Finally, pay attention to which pair you trade. Major pairs like EUR/USD have deeper liquidity and typically recover faster than exotic pairs, which can stay wide for much longer.

There’s no rule saying you must sit on your hands during every news event, but the traders who thrive in these moments have a plan that accounts for messy execution. They know that being right on direction is useless if the entry price is eaten by a 10-pip spread. Often the wisest move is simply to watch, learn the rhythm of your own broker’s pricing during volatile events, and trade calm waters instead.

Spreads widening around big news isn’t a punishment. It’s the market’s honest way of pricing uncertainty. Accept that, and you stop fighting the weather and start navigating it.