Direct answer
Forex spreads may widen around 10pm local time because the market’s available liquidity and the willingness of liquidity providers to quote prices can change during a daily transition. Spreads are not fixed; they reflect how much it costs to buy and sell immediately at the quoted level. When fewer participants are active, the bid–ask gap can increase.
Explanation: what “spread” depends on
A forex spread is the difference between the bid price (sell) and the ask price (buy). Even if a currency pair’s “fair value” does not change much, the spread can widen when the order book becomes thinner or when liquidity providers quote less aggressively. Common drivers that can line up around specific evening times include:
- Lower active participation: If many traders are inactive, there may be fewer resting orders close to the current price, increasing the gap needed for immediate execution.
- Reduced market-making sensitivity: Liquidity providers manage inventory and risk; when conditions look less predictable (for example, around shifts in trading activity), they may widen spreads to compensate.
- Volatility and uncertainty: Higher short-term uncertainty can make it harder to quote both sides tightly, leading to a larger bid–ask difference.
- Session timing effects: The “around 10pm” moment is often a consequence of time-zone overlap ending or beginning, not a universal rule. Different regions may experience changes at different clock times.
Example checks you can do
Because the exact cause depends on the pair, the venue, and the platform, you can independently verify the pattern by comparing observations:
- Compare the same pair across days: If spreads widen at the same clock time repeatedly, it suggests a time-based liquidity pattern rather than a one-off news event.
- Check whether the move is liquidity-related, not price-related: A wider spread without a comparable jump in mid-price often indicates thinner quotes rather than a major re-pricing.
- Look for broader market conditions: If spreads widen alongside other signs of reduced trading activity (such as fewer tight bid/ask updates), that supports the liquidity-thinning explanation.
Limitations and uncertainty
There is no single, universal “10pm rule” for all forex markets. The clock time that matters depends on time zones, trading sessions, and the specific broker or trading system’s feed/quote conventions. Also, spreads can widen for many reasons, including temporary risk changes or short-lived liquidity drops caused by events. Any explanation should be treated as probabilistic: you can narrow the likely driver by checking whether the widening aligns with thinner liquidity and session transitions in your own data.