Bid-Ask Spread

The difference between the Bid (selling price) and the Ask (buying price) of a currency. It’s one of the most basic measures of transaction cost in the foreign exchange market. 

For example, if a currency pair is quoted at 1.1050/1.1070, the spread is 20 pips (0.0020). This is essentially the fee or markup the market maker earns for providing liquidity. 

Spreads tend to be narrower for highly liquid currencies like EUR/USD and wider for emerging-market currencies. Understanding the spread is essential when pricing currency forwards, options, or swaps, especially when large volumes or thin markets are involved.