What is the average spread on EURUSD? Analysis

The EUR/USD currency pair is the most traded instrument in the forex market, often regarded as the king of forex pairs. It represents the euro against the US dollar, the world’s two most liquid and widely used currencies. Because of its popularity, traders pay close attention to the spread of EURUSD, even when trading other market products. This is because this pair’s spread can be a good indicator of the broader market.

In this article, we will provide an in-depth analysis of the average spread on EUR/USD, exploring its definition, influencing factors, broker variations, and implications for traders. We will also explore how traders can use this information to their advantage.

What is a Forex Spread?

Before diving into averages, let’s break down the concept of spreads. In forex trading, the spread is the difference between the bid price and the ask price. It's essentially the transaction cost you pay to your broker for trading a currency pair. The spread is measured in pips, which are the smallest unit of price movement for a currency pair.

Spreads are important to consider because they directly impact trading costs. A lower spread means lower trading costs, while a higher spread increases costs. Since EURUSD is highly liquid, it usually has the lowest spreads in the forex market, making it a favourite among traders. So what is the average spread on EURUSD? Let’s explore.

Average EURUSD Spread

The average spread on EUR/USD isn't a fixed number. It can fluctuate based on several factors. These include:

Broker Type

Your choice of broker is one of the most significant factors affecting the spread you pay. Brokers generally operate under two main models, which include market makers vs ECN/STP brokers. Market Maker (dealing desk) brokers often provide fixed spreads, which remain constant regardless of market conditions. They quote their own prices to clients and may take the other side of a trade. The average spread for EURUSD with a market maker might be fixed at 1.0 to 3 pips.

The advantage is predictability, as traders know their cost upfront regardless of market volatility. The disadvantage is that these spreads are typically wider than the underlying interbank market to ensure the broker's profit.

In contrast, ECN/STP (Non-Dealing Desk) brokers connect traders directly to a network of liquidity providers (large banks, financial institutions). These brokers usually offer variable or floating spreads, which reflect the real-time bid and ask prices from their liquidity providers.

These spreads are generally tighter during normal market conditions, but can widen significantly during high volatility. The average spread for EUR/USD on a quality ECN account can be razor-thin, often between 0.1 to 1.0 pips during optimal conditions.

Market Liquidity

This is another significant factor. During peak hours, like when the London and New York sessions overlap, liquidity for EUR/USD is at its peak, and spreads are at their lowest. They can even go below 0.5 pips, especially on ECN accounts. Conversely, during off-hours or holidays, liquidity decreases, and spreads tend to widen. Off-peak hours can result in average spreads above 1.6 pips for the EURUSD pair.

Market Events

Economic announcements, such as U.S. Non-Farm Payrolls or European Central Bank (ECB) interest rate decisions, can cause spreads to spike. This is because liquidity providers may withdraw their quotes to manage risk. Any trader must be aware of the economic calendar and avoid trading during these events if they wish to avoid spread spikes.

Account Type

The type of trading account you have with a broker also directly impacts the spread you pay. Brokers often offer a range of account types to suit different trading styles and capital levels, each with a unique pricing structure.

Standard accounts are the most common account types and are often offered on a no-commission basis. They usually feature floating spreads averaging around 1.0 pips for the EURUSD pair with no commission.

Another common account type on brokers is a Raw Spread account. They provide direct access to the raw market spreads from liquidity providers, which can be as low as 0.0 pips. However, to compensate, brokers usually charge a fixed commission per lot traded.

Implications for Traders

The average spread on EUR/USD isn’t just a number. It directly influences trading costs, strategy selection, and overall profitability. Different trading styles are affected in distinct ways:

• Scalping and High-Frequency Trading - For scalpers and high-frequency traders who aim to profit from small price movements, brokers with ultra-low spreads are a priority. ECN accounts are ideal here, as the lower spread offsets the commission cost over multiple trades.

• Day Trading - Day traders who hold positions for several hours need spreads tight enough to avoid cutting into their profit margins, but not necessarily as razor-thin. Spreads between 0.5-1.0 pips are usually manageable, provided that slippage and execution speed are also reliable.

• Swing and Long-Term Strategies - Traders who keep positions open for days or weeks are less sensitive to spreads because their profit targets are much larger. Still, over time, consistently using brokers with tighter spreads improves net profitability.

Some of The Lowest EURUSD Spread Brokers

Let us now look at some of the top brokers with competitively low average spreads for the EURUSD pair.

Pepperstone

Pepperstone stands out as a top choice for forex traders seeking low costs, particularly on the EURUSD pair. On its Standard account, the broker provides traders with a minimum spread of 1.0 pips on the EURUSD pair, with the average spread coming in at around 1.1 pips. On the Razor account, the minimum spread is 0.0 pips, and the average spread is 0.1 pips on this account.

However, the Razor account charges a commission depending on the trading platform used. For clients utilising the MetaTrader 4 or MetaTrader 5 platforms, the commission charged is $3.50, €2.60, £2.25, or CHF 3.30 per side per lot, depending on their account currency. The same $3.50 per side per lot commission applies to those trading on TradingView and the Pepperstone Trading Platform.

Meanwhile, cTrader users enjoy slightly lower fees, with a commission of $3.00 per side per lot. Non-USD accounts on TradingView, cTrader, or the Pepperstone Trading Platform all commissions are converted to the account's currency using the current spot exchange rate.

Beyond EURUSD, the broker maintains similarly attractive pricing across its wide range of over 90 currency pairs and other instruments. Pepperstone provides access to a total of over 1,400 CFD instruments across various markets. These include CFDs on ETFs, currency indices, commodities, stocks, and indices.

While regulations alone are not enough, it is always better to use a broker with regulations from world-class organisations. Luckily, Pepperstone has regulations from the FCA in the UK, the CySEC in Cyprus, the ASIC in Australia, the BaFin in Germany, and the CMA in Kenya, among others.

73.7% of retail CFD accounts lose money

XM

XM is another broker that stands out for its low average spreads on the EURUSD pair. Specifically, XM has an average spread of 1.1 pips on the XM Ultra Low account. On the Standard account, the average spread is significantly higher on this pair at 2.0 pips. Both accounts do not charge commissions.

XM offers clients access to a diverse collection of trading instruments, totalling over 1,000 different products. In particular, this broker allows its clients to trade CFDs on forex, shares, equity indices, commodities, stocks, metals, cryptocurrencies, and energies. This allows traders to diversify their portfolios across the various global markets. To access these market products, the broker supports MetaTrader 4, MetaTrader 5, and XM’s trading app.

Regarding regulations, XM is licensed by the CySEC, the DFSA in the DIFC, and the FSC in Belize. This multi-regulatory framework is one of the reasons why XM has grown into one of the largest brokers in the world.

74.3% of retail investor accounts lose money when trading CFDs with this provider.

Exness

Exness is another well-regarded broker known for offering tight spreads on the EURUSD pair. The Standard and the Standard Cent accounts have an average spread of 0.9 pips for the pair, with no commission. The Pro account features a lower average spread of 0.6 pips for the EURUSD pair, also with no commission. Finally, the Zero and the Raw Spread accounts both feature an average spread of 0.0 pips plus a commission of $3.5 per side per lot on both accounts.

Exness provides a wide range of trading instruments, with over 100 currency pairs and more than 250 CFDs in total. These include CFDs on cryptocurrencies, stocks, metals, energies, and indices, alongside forex. Clients have the flexibility to trade through MetaTrader 4, MetaTrader 5, the proprietary Exness Terminal, or the Exness Trade App.

From a regulatory perspective, Exness maintains strong credibility. It holds licenses from several authorities, including the JSC in Jordan, the CySEC in Cyprus, the FCA in the UK, the FSCA in South Africa, and the CMA in Kenya, among others. Despite having European regulations, the company does not accept retail traders from most EU countries. A wide range of international clients is, however, welcomed.

Remember that Forex and CFDs available at Exness are leveraged products.
Their trading can result in the loss of your entire capital.

Final Comments

The average spread on the EURUSD is not a single, static figure but a dynamic cost influenced by a number of factors. As the world's most liquid currency pair, it typically offers the tightest spreads in the forex market. However, its average spreads can range dramatically from below 0.1 pips to over 3 pips depending on the broker's model, account type, market liquidity, and underlying volatility.

The critical takeaway for traders is that understanding these variables is essential for managing costs and selecting the right strategy. Ultimately, the best approach is to conduct thorough research, factoring in your specific trading style and risk tolerance. Regardless of your style, selecting a broker that aligns with your needs can significantly boost long-term returns.