Low Spread Currency Pairs (2024) – ☑️ Pros & Cons Revealed (2024)

In the foreign exchange (FX) market, currency pairs are the national currencies of two countries that are linked together for trading purposes. Both currencies will have exchange rates, which will serve as the basis for the trade’s position basis. Trading in the forex market will take place through currency pairs in order to facilitate all aspects of the transaction, including selling, buying, and trading.

The spread is essentially one component of the cost for you as a trader to open any trades in the foreign exchange market. It is factored into the overall price of trading.

Common objects are priced lower than others, more exotic, and in high-demand items, much as they are in real life. The same is true for currency pairings with modest spreads that are frequently traded on the Forex market.

The ability to trade with a low spread is extremely significant for frequent traders, for whom every pip change makes a difference.

The US Dollar appears on one side of all major currency pairs – either on the base side or on the quote side, depending on the pair. They are the most actively traded currency pairs in the foreign exchange market. The majors often have the lowest spreads and are the most liquid of the financial markets. The EUR/USD pair is the most actively traded pair, accounting for almost 30 percent of total daily trade activity in the foreign exchange market.

Major currency pairs

The following is a list of major currency pairs and the countries from where they originate, those that usually have the lowest spreads available:

The EUR/USD currency pair links together the national currencies of the Euro Zone and the United States for trading purposes.

The USD/JPY currency pair links together the national currencies of the United States and Japan.

The GBP/USD currency pair links together the national currencies of the United Kingdom and the United States.

The USD/CAD currency pair links together the national currencies of the United States and Canada.

The USD/CHF currency pair links together the national currencies of the United States/Switzerland

The AUD/USD currency pair links together the national currencies of Australia and the United States.

The NZD/USD currency pair links together the national currencies of New Zealand and the United States.

EUR/USD, the lowest spread pair

With the EUR/USD pair, one can expect the lowest spread, from 0.1 pips. This is generally considered the most traded currency pair as it stems from two of the world’s largest and most reputable economies.

Variable spreads for this currency pair, in normal trading activity, range from 0.1 to 3 pips, depending on the broker. For fixed spreads, they go from 0.3 to 5 pips (excluding commission).

Apart from being associated with very low spreads, this pair is also associated with high liquidity and the ability to place large volumes of trade. Because the markets are mostly stable throughout the year, this combination can be considered one of the best currency pairs for forex scalping. As a result, it is possibly one of the most profitable currency pairs in terms of smaller and more frequent earnings.

This pair’s volatility is known to spike during news events, with EUR/USD being the most popular. The USD is frequently affected by news events, the economic calendar, social media activity, and political events (United States). Furthermore, given that the EUR (European Union) is made up of many countries, any crisis in one of them may have an impact on the Euro.

This currency pair is interesting to trade because it has a mix of trading sessions and volatility spikes, despite having the lowest spread.

USD/JPY, the second lowest spread pair

This combination of the US dollar and the Japanese yen is one of the most popular forex pairs in the world due to the prominence of the JPY throughout Asia and the USD worldwide.

The variable spread for this currency pair usually ranges from 0.2 to 2 pips. Because of a big gap between trading sessions, it is great if a trader wants to focus on one economy. The two economies, one the exporting type (Japan) and the other a big importer (US) provide two distinct trading sessions. Combine this with its typically low spreads and it provides some good trading opportunities for forex traders.

GBP/USD, a low spread pair on the move

Because of the large fluctuations in the value of the British pound, the GBP/USD combination is unique. When you combine this with high liquidity and, as a result, low spreads, you obtain opportunities for low spread techniques that do not work on other pairings of currency pairs.

Spreads for this currency pair range from 0.3 to 2.7 percentage points, net of commissions, depending on the market. Because of the high daily average range (68 pips) of the GBP/USD pair, the spread (1.4 pip) will eat away at your maximum potential profit by approximately 2.0 percent every trade, which is smaller than the spread for the USD/JPY pair (2.4 pip).

Because of the frequent swings in price, exchange rate, and pip movements, this combination of the British pound sterling and the US dollar is regarded as a very volatile currency pair. The pound sterling and the US dollar While this can result in significant profits if the trader is successful, it can also result in significant losses if market volatility is strong during the trading session.

Trading in the GBP/USD is particularly popular among day traders, who seek to profit from price swings by entering and exiting the market at a rapid and accurate pace. As a result, it is also one of the finest forex pairs for swing trading, which is another short-term forex technique that utilizes the yen. Trading this volatile currency pair is not suggested unless the trader has a strong understanding of technical analysis of the market before entering any positions.

USD/CHF, a combination of low spread and high stability

Stability is one of the traits of CHF, but it does not mean that there are no opportunities for trading.

The Swiss Franc experiences close to zero inflation and the country’s banking system is regarded as one of the best in the world for investors. It is an easy-to-follow currency pair with low spreads that range from 0.5 to 5 pips. The average spread is 1.2 pip.

It is one of the most traded currency pairs with a low spread on Forex. The combination of the US dollar and the Swiss franc is a popular forex pair for traders when the economic or political situation of a region is uncertain. For many years, the financial stability of Switzerland has been used as a ‘safe haven’ for investors of the forex market, who will rely on trading the CHF in times of market volatility.

When the value of the CHF strengthens against the USD due to increasing investment, the price of this currency pair starts to drop. Although it is one of the most stable currency pairs to trade and therefore offers many benefits, when the markets are in a more stable position, the USD/CHF may be of less interest to traders who opt for other major currency pairs.

EUR/JPY, a non-USD pair with a low spread

This currency pair is more sensitive and may have big movements. Its spread may not be the lowest offered but is usually low enough to boost the potential of this pair for frequent traders.

Since the two economies that are involved in this pair are smaller, a trader can expect that any event can cause bigger changes in the market than is the case with other currencies.

These pairs offer the perfect mix of low spread and opportunity with a spread range from 0.5 to 5.7 pips and an average spread (1.2 pip) to a potential profit ratio of 1.9%.

This currency pair is also interesting because it is rarely fluctuating or moving sideways.

EUR/GBP, a strong pair with a low spread

The EUR/GBP pair is a combination of the Euro and the British pound sterling, nicknamed “The Chunnel”, a play on words for the Channel Tunnel that connects the two countries.

This currency pair, with a minimum spread of 1.1 points, is usually perceived as a very strong pair, given the proximity of regions and their solid history of trade. Given the situation of Brexit on the economy, the forex pair has become more volatile in recent years, which can be very attractive for the more skilled kind of trader.

The exchange rate also relies on changes to interest rates which are announced by regional banks; therefore, one currency can suddenly strengthen against the other, making the pair much more volatile. This also applies to the other currency pairs discussed in this article.

Even though a broker may offer low spreads, the commission may mask the total cost. If we take this into consideration, finding a broker with the right offer may be quite a task. Finally, a trader must understand that all the major 8 currency pairs combinations are liquid enough to have low spreads.

Cross-Currency Pairs or Minor Currency Pairs

Currency pairs that do not contain the US Dollar are known as cross-currency pairs or minor currency pairs. While in the past it was necessary to first convert any currency into US dollars before it could be converted into another currency desired, the introduction of currency crosses eliminated this tedious calculation as all brokers now offer direct exchange rates.

The most active crosses are derived from the three major non-US dollar currencies (the Euro, the UK Pound, and Yen) and these currency pairs are all known as minors.

The following is a list of minor currency pairs and the countries from where they originate, those that usually have fairly low spreads:

The EUR/GBP currency pair links together the national currencies of the Euro Zone and the United Kingdom.

The EUR/CHF currency pair links together the national currencies of the Euro Zone and Switzerland.

Exotic currency pairs

Exotic currency pairs are made up of a major currency paired with the currency of an emerging or a smaller but strong economy from a global perspective such as Hong Kong or Singapore and European countries outside of the Euro Zone.

These pairs are not favored for trading as often as either the majors or the minors, so usually, the cost of trading these pairs will be a bit higher than the cost of trading the majors or minors. This is mainly due to the lack of liquidity in these markets.

The following is a list of exotic currency pairs and the countries from where they originate, those that may have fairly low spreads:

The EUR/TR currency pair links together the national currencies of the Euro and Turkish Lira

The USD/SEK currency pair links together the national currencies of the US Dollar and Swedish Krona

The USD/NOK currency pair links together the national currencies of the US Dollar and Norwegian Krone

The USD/DKK currency pair links together the national currencies of the US Dollar and Danish Krone

The USD/ZAR currency pair links together the national currencies of the US Dollar and the South African Rand

The USD/HKD currency pair links together the national currencies of the US Dollar and the Hong Kong Dollar

The USD/SGD currency pair links together the national currencies of the US Dollar and Singapore Dollar

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Louis Schoeman

Featured SA Shares Writer and Forex Analyst.

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