What is an FX spread, and how is the mid-market rate actually set?
There is no such thing as the exchange rate. There is a price to buy and a price to sell, and the number in the news is neither of them.
The spread is the market. Everything past it is a decision.
Where the rate actually comes from
Currency does not trade on one exchange with one price. It trades across a decentralised market of banks and brokers quoting to each other continuously, and at any instant there is a best bid and a best ask.
The mid is the average of those two. It is genuinely useful as a reference, because it is the least arbitrary single number available, and it is what news outlets, charts and comparison sites quote. But no retail customer transacts at the mid, and neither does anyone else. You buy at the ask and sell at the bid. The mid is the line between two prices, not a third price.
Spreads widen and narrow with liquidity. A major pair in the middle of the London session has a spread so tight it is nearly invisible. The same pair at three in the morning, or a thinly traded pair at any hour, is materially wider, and that widening is real market cost rather than anyone's margin.
Spread, markup, and fee
Three different things that arrive as one number on your statement.
The spread is what the market charges, and nobody avoids it.
The markup is what your provider adds by giving you a rate worse than the one they obtained. It is invisible unless you compare against the mid at the moment of the transaction, which almost nobody does.
The fee is the line item you can see.
This is why "zero fee" is such a durable piece of marketing. It is usually true and almost never relevant. Removing a two pound fee while taking a two percent markup on a thousand pounds is a worse deal presented as a better one, and the customer has been given a true statement that leads them to a false conclusion.
The test that cuts through all of it: ignore every fee and rate quoted, and ask what lands in the recipient's account. One number, at the far end. It is the only comparison that cannot be dressed.
A market stall sells apples at fifty and buys them at forty. The newspaper prints "apples: forty-five", and forty-five is a fact about apples that you cannot buy an apple for. A second stall advertises no commission, buys at thirty-eight, and is entirely honest about the commission.
What moves it, and what does not
Retail customers frequently time transfers around headlines, and mostly this is noise. The rate moves on interest rate expectations, trade flows and positioning, and by the time a development is a headline it is in the price.
What you can control is the spread you accept and the markup you agree to, and those are decisions rather than forecasts. A markup difference of one percent is larger than most of the daily movement people wait for.
Where you meet it
Every international transfer. Every card payment abroad. Every travel money counter with a board showing two numbers and a sign saying no commission.