Spot quotes are quotes stated at the current market price. In a foreign exchange market, there is always a buying price and a selling price: one for what a seller is willing to sell and the other for what a buyer is willing to buy. For a spot transaction, one currency is outright exchanged for another, although payment is not necessarily immediate or “on the spot.” The settlement date typically occurs on the second business day after the deal date to allow sufficient time for the parties to confirm and arrange the necessary procedures.

There are two ways in which spot rates are quoted: direct quote or indirect quote. A direct quote states the amount of home currency per unit of foreign currency and an indirect quote states the amount of foreign currency per unit of domestic currency. They are reciprocals of eachother and either quote can be derived from the other. Most prices are quoted as a direct quote.

The phrases “American terms” and “European terms” are also used in currency markets. “American terms” is used to describe a direct quote from someone located in the US (e.g., $0.5883USD per EUR1) while “European terms” is used to describe a direct quote from someone located in Europe (e.g., EUR 1.6998 per $1USD).

In every foreign exchange transaction, there is a base currency and a terms currency. The “terms” currency is the numerator and the “base” currency is the denominator. The “base” currency is always fixed whether a trader buys or sells while the “terms” currency is the currency that is adjusted according to the exchange rate. The “base” currency is typically stated first in oral communications. For example, “dollar-euro” means the dollar is the “base” and the euro is the “terms.”

A bid and offer price is evident in a currency market. The bid price states the amount of “terms” currency a market maker will pay for a unit of “base” currency while the offer price states the amount of “terms” currency the market maker will sell for a unit of “base” currency. For example, in a “dollar-euro” quote of 1.4978-89, the bid price would be EUR 1.4978 per dollar and the offer price would be EUR 1.4989 per dollar. The bid price is always lower and stated first. The offer price is larger and stated last. The difference is the dealer’s spread or profit.

Source:

http://www.theforextradinginstitute.com/resources/article/what-is-spot/