Spot FX Vs. FX Futures

Open interest and volume data on currency futures allow you to gauge market sentiment in the currency futures market, which also influences, and is influenced by, the spot forex market. Currency futures are basically spot prices, which are adjusted by the forward swaps (derived by interest rate differentials) to arrive at a future delivery price. Unlike spot forex, which does not have a centralized exchange, currency futures are cleared at exchanges, such as the Chicago Mercantile Exchange (CME), which is the world's largest market for exchange-traded currency futures. Currency ffutures are generally based on standard contract sizes, with typical durations of three months. Spot forex, on the other hand, involves a two-day cash delivery transaction. (To learn more, see Futures Fundamentals.)

One of the many differences between spot forex and currency futures lies in their quoting convention. In the currency futures market, currency futures are mostly quoted as the foreign currency directly against the U.S. dollar. For example, Swiss francs are quoted versus the U.S. dollar in futures (CHF/USD), unlike the USD/CHF notation in the spot forex market. Therefore, if the Swiss franc depreciates in value against the U.S. dollar, USD/CHF will rise, and the Swiss franc futures will decline. On the other hand, EUR/USD in spot forex is quoted in the same manner as euro futures, so if the euro appreciates in value, euro futures will rise as the EUR/USD goes up. (For more insight, see The Forex Market.)

The spot and futures prices of a currency (not currency pair) tend to move in tandem; when either the spot or futures price of a currency rises, the other also tends to rise, and when either falls, the other also tends to fall. For example, if the GBP futures price goes up, spot GBP/USD goes up (because GBP gains in strength). However, if the CHF futures price goes up, spot USD/CHF goes down (because CHF gains in strength), as both the spot and futures prices of CHF move in tandem.