Direct answer
Forex spreads can widen around 5pm because that time often coincides with a reduction in market liquidity and quoting depth. When there are fewer active participants and fewer buy and sell orders clustered near the current price, market makers and trading systems may need to quote with a larger bid-ask distance to manage the higher cost and uncertainty of filling orders.
How it works (liquidity, quotes, and spreads)
A forex spread is the difference between the quoted bid price (what the market is willing to buy at) and the quoted ask price (what it is willing to sell at). The spread is closely related to how densely orders are posted in the order book near the current price.
As trading shifts toward the end of a major session, several general effects can occur:
- Lower order-book depth: With fewer orders on both sides of the market, it is harder to transact at the exact displayed price.
- Less competition among liquidity providers: If fewer participants are actively quoting, the market may rely on fewer quotes, which can be wider.
- Greater price impact: A trade may move the next available quote more than it would during peak liquidity.
- Higher uncertainty: Even without a news event, thin liquidity can make short-term price discovery noisier.
When these conditions happen, the same “market” value can require a bigger bid-ask spread to keep execution practical for the quotes that remain.
Example and independent checks
You can verify the general mechanism without relying on any specific platform or instrument-specific fact:
- Compare liquidity and spread changes: Look at how bid-ask spreads behave when trading activity is high versus when it is lower.
- Check time-zone alignment: “5pm” depends on the time zone you use, and forex trading is global. The local end of a major session may occur at different clock times elsewhere.
- Compare during session transitions: If you notice wider spreads around the transition periods between major regional trading windows, that supports the liquidity explanation.
If spreads widen while volatility is also elevated, that can reinforce the liquidity-and-uncertainty link: volatility increases the risk that quotes become stale quickly when depth is thin.
Relevant limitations and uncertainty
This explanation is a general market-structure mechanism, not a guarantee about any specific instrument or provider. The exact “5pm” timing can vary because:
- different brokers and venues may update quotes on different schedules,
- currency pairs trade with different liquidity patterns,
- and the relevant “session end” may occur at different times depending on time zone.
Also, spreads can widen for reasons other than time-of-day alone, such as sudden changes in market volatility or shifts in order-flow. Therefore, the most verifiable approach is to compare bid-ask behavior across high- and low-liquidity periods for the same instrument and venue.