When a high-impact economic release lands — a central bank decision, a US inflation print, a jobs report — the spread on your favorite currency pair can jump from a fraction of a pip to several pips within seconds. For an active trader, that change is not background noise. It is a direct cost that hits every order routed through a widening market, and it behaves differently from the spread you see on a quiet Tuesday afternoon.

What the spread actually is

The spread is the gap between the price at which you can sell (the bid) and the price at which you can buy (the ask). If EUR/USD is quoted 1.08502/1.08512, the spread is one pip. When you open and later close a market position, you cross that gap once per trade, so the spread is a round-trip cost paid to the market-making side of the transaction — whether your broker prices it explicitly or bundles it into a commission-free quote.

In quiet conditions, the interbank FX market — the wholesale market where banks and dealers trade with each other — is extremely deep. The Bank for International Settlements' 2025 Triennial Central Bank Survey measured OTC foreign exchange turnover at $9.6 trillion per day in April 2025, up 28% from three years earlier [1]. Deep, continuously quoted markets are what keep retail spreads tight: a dealer can hedge your position almost instantly at a tiny markup.

Why news events widen spreads

Around a scheduled release, three things happen at once:

1. Uncertainty spikes before the number. Just before the release, no one knows the print. Market makers cannot agree on where the fair price is, so the bid and ask drift apart rather than both sides quoting tightly around one consensus level.

2. Liquidity withdraws. Dealers widen quotes or pull them entirely to avoid being run over by informed flow in the first seconds. Liquidity providers who cannot update quotes fast enough simply step back. With fewer resting orders, the surviving quotes must be farther apart to compensate for the risk of trading at a stale price.

3. Flow becomes one-sided. A surprise number sends nearly everyone in the same direction. When the first major participant absorbs that flow, it demands a wider spread — a form of slippage, which in finance is the difference between the price you expected and the price you actually got [2].

The result is a characteristic pattern: spreads widen in the minutes before a release, spike sharply in the first seconds after it, and then compress over seconds to minutes as two-sided quoting returns. Rolling news coverage of this kind is exactly why financial regulation of retail FX grew after 2010 — not because widening itself is wrongdoing, but because unexplained execution behavior became a consumer-protection concern in many jurisdictions [3].

What a widened spread costs — an illustrative example

The figures below are a clearly labeled illustrative calculation, not an observation from any specific broker. For a standard lot of EUR/USD (100,000 units), one pip is conventionally about $10. Suppose the spread is normally 1.0 pip and widens to 5.0 pips across a news window:

• Normal round-trip cost: 1.0 pip × $10 = $10

• Widened round-trip cost: 5.0 pips × $10 = $50

• Extra cost from trading through the news window: $40, a fivefold increase

Computed with the pip-value convention of $10 per pip per standard lot for EUR/USD. On smaller position sizes the dollar figures scale down proportionally, but the fivefold multiple does not — and on exotic pairs, where baseline spreads are already wider, the same proportional widening costs more in absolute terms. If your strategy targets a 10-pip average profit per trade, an unplanned 4-pip widening is a 40% haircut on the trade's economics before any directional outcome.

Options traders actually weigh

No single approach is universally right; each is a trade-off:

• Waiting out the spike. Spreads usually compress within minutes as quotes normalize. The trade-off: by then, much of the initial price move has already happened, and re-entry may be at a worse level.

• Pre-positioning before the release. You keep a tight spread, but you hold full exposure through the release itself, when gap risk and slippage on any exit are highest. Order types do not fully protect you here — a stop-loss in a gapping market can fill far from its trigger.

• Sizing for the widened environment. Some traders reduce position size around scheduled events so that the widened spread, plus potential slippage, stays within a pre-planned cost budget. The cost math above is the tool: estimate the worst plausible spread, multiply it by your pip value, and check whether the result fits your plan.

• Checking how your broker behaves. Some brokers publish or disclose typical spread behavior; a broker database can show the advertised minimum spread, but advertised minimums describe quiet conditions, not news windows. The honest comparison is between disclosed execution policies, not between headline numbers.

One structural note: execution models differ. A broker operating on an agency/ECN-style model passes the underlying market's widening through to you, while a dealer model may re-quote or widen its own book. Neither approach makes news-event costs disappear — they change where and how you experience them.

Risks and limits

• Spread widening is normal market behavior, not automatically broker misconduct — but persistent, unexplained widening outside news windows is worth investigating through a broker's complaint channels and, where applicable, its regulator.

• Widening compounds with slippage and gaps. Around major releases, your effective entry cost can exceed the displayed spread at the moment you clicked.

• Regulatory leverage caps — for example, the 30:1 major-pair cap that ESMA introduced in 2018 and the FCA carried into UK rules in 2019, or the CFTC's 50:1 major-pair cap in the US — limit position sizes but do not change spread behavior [3].

• Figures in the example section are illustrative and computed from a stated pip-value convention; they are not measurements of any live broker's pricing.

• Nothing here is financial advice or a recommendation to trade through, or avoid, any specific event.

Key takeaways

• Spreads widen around scheduled news because uncertainty rises, liquidity withdraws, and flow becomes one-sided — all normal responses by liquidity providers.

• The cost is concrete: in an illustrative EUR/USD case, a 1-pip spread widening to 5 pips turns a $10 round trip into $50 on a standard lot.

• Advertised minimum spreads describe quiet markets; compare brokers on disclosed execution behavior around news, not headline pricing.

• Position sizing can absorb widened-spread cost; order types alone cannot eliminate gap risk in a fast market.