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Cross rate

An exchange rate between two currencies that does not include the US dollar, usually derived from each one's dollar rate.

Historically a cross was any pair not involving the domestic currency; in modern trading it means any pair without the dollar, such as EUR/GBP, AUD/JPY or EUR/CHF. See also dollar-pair.

Most crosses are still priced off the dollar legs behind the scenes, because that is where the deepest liquidity sits. A bank quoting EUR/GBP is effectively combining EUR/USD and GBP/USD, then adding a spread for the extra work. That is why crosses usually show wider spreads than either dollar pair.

Example: EUR/USD is 1.0840 and GBP/USD is 1.2700. The implied EUR/GBP is 1.0840 / 1.2700 = 0.8535. If a broker quotes EUR/GBP at 0.8533 / 0.8537, the two-pip spread is roughly the sum of the spreads on the legs.

Related: dollar-pair, triangular-arbitrage, euro-cross, yen-cross

See it drawn

Original diagrams for the ideas on this page. Illustrative, not real market data.

Bid-ask spread in an order bookSell orders stacked above buy orders with a gap between the best of each.SELLERS (asks)50.0690050.051,40050.0460050.011,10050.002,30049.99800spread = 0.03BUYERS (bids)
The bid-ask spread. Buy orders sit below, sell orders above, and the gap between the best bid (50.01) and best ask (50.04) is the spread you pay to cross. Bar length shows the size resting at each price.

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