What Happens to Currency Pairs During Major News Events?

1. Why spreads specifically widen around major news

Market makers and liquidity providers widen spreads around major scheduled news because offering tight, continuous pricing gets genuinely riskier when an imminent announcement could trigger significant, unpredictable price movement. That widening compensates them for the elevated risk, and it's a consistent, predictable pattern around virtually all major scheduled releases.

It's worth checking your specific broker's actual spread behaviour around a genuine, past news event, rather than assuming a general estimate applies, comparing screenshots or logged spreads from before and during a recent release gives you concrete, personally relevant data on how your specific platform handles this widening.

2. The liquidity-thinning effect explained

Beyond wider spreads, overall market liquidity, the depth of real buying and selling interest at any given price level, often thins noticeably in the moments right before and during a major news release, as many participants pause active trading to avoid getting caught in the chaotic price action the release might trigger.

That temporary liquidity drop compounds the spreadThe spread is the gap between an instrument's buy and sell price, and the most fundamental trading cost.Click to read more →-widening above, together making conditions meaningfully worse during this window than under normal market conditions.

3. Price gaps and rapid movement during the actual release

When the actual release lands, especially if it significantly surprises expectations, prices can move extremely fast, sometimes appearing to "gap," jumping from one price level to another without trading through the prices in between, given the thinned liquidity above. That rapid, sometimes discontinuous movement is exactly what produces elevated slippageSlippage tolerance sets the maximum acceptable price deviation before an order is rejected rather than executed at a significantly different price..Click to read more → risk.

It's worth understanding why this genuinely differs from the more gradual price movement you're used to seeing during calmer conditions, the sheer speed and discontinuity of news-driven movement means normal assumptions about how orders will execute can break down precisely during these windows.

4. The expectations-versus-actual dynamic

The size of the price move following a release often depends more on how the actual result compares to what markets already expected and priced in, rather than the raw figure itself. A release that closely matches expectations often produces fairly muted movement, while a genuinely surprising result, even on a seemingly modest figure, can trigger a much bigger move simply because it wasn't anticipated.

It's worth checking published consensus forecasts before any major scheduled release specifically, discussed elsewhere on this site regarding economic calendar awareness, understanding what the market already expects gives you a genuine reference point for judging how significant the eventual actual reaction is likely to be.

5. Practical approaches to trading around scheduled news

Many traders avoid opening new positions right before a major scheduled release, given the elevated cost and risk above, and wait until the initial, often chaotic reaction has settled before considering new positions based on the post-release direction. Others actively seek out the opportunities this volatilityVolatility measures how much and how quickly an instrument's price fluctuates.Click to read more → creates, accepting the elevated risk as a deliberate, calculated part of their strategy.

Neither approach is universally right. It depends on your strategy, risk tolerance, and experience level, though beginners often benefit from the more cautious approach until they've built enough experience to manage this kind of volatility deliberately and with proper risk management.

It's worth deciding your specific approach to any given release well in advance, rather than improvising in the moment, having a predetermined plan, whether that's avoiding the window entirely or trading it deliberately with adjusted risk parameters, removes the need for reactive decision-making during exactly the conditions least suited to it.

6. The specific elevated risk of slippage during these events

Any open position, including predetermined stop-lossA stop-loss automatically closes a losing position at a predetermined level; a take-profit does the same for winning positions.Click to read more → orders, carries a higher risk of executing at a meaningfully different price than intended during this high-volatility window, given the combination of thinned liquidity and rapid price movement covered above.

That elevated slippage risk is exactly why negative balance protection exists as an important backstop. Extreme news-driven volatility is exactly the scenario where this protection becomes most practically relevant.

CFD and forex instruments give South African traders access to global markets from a single ZAR-denominated account without needing separate international brokerage relationships. This accessibility comes with structural characteristics that traders must understand clearly. CFDs are derivative instruments, you never own the underlying asset, and profit or loss is purely the mark-to-market difference between entry and exit prices multiplied by position size. The overnight financing charge applies to the full notional value of leveraged positions, not just the deposited margin. For traders holding positions for multiple days or weeks, this financing cost compounds and can meaningfully reduce the profitability of otherwise successful trades. Understanding the exact financing rates your broker applies to each instrument class before trading is fundamental preparation, not an optional detail.

CFD and forex instruments give South African traders access to global markets from a single ZAR-denominated account without needing separate international brokerage relationships. This accessibility comes with structural characteristics that traders must understand clearly. CFDs are derivative instruments, you never own the underlying asset, and profit or loss is purely the mark-to-market difference between entry and exit prices multiplied by position size. The overnight financing charge applies to the full notional value of leveraged positions, not just the deposited margin. For traders holding positions for multiple days or weeks, this financing cost compounds and can meaningfully reduce the profitability of otherwise successful trades. Understanding the exact financing rates your broker applies to each instrument class before trading is fundamental preparation, not an optional detail.