The difference between the foreign exchange (FX) spot rate on the forward date and the FX forward rate. It can be calculated using the following formula:

Currency surprise = [(spot rate at period-end/ spot rate) – 1] – forward implied return

The forward implied return is given by:

Forward implied return = (forward rate/ spot rate) – 1

The currency surprise arises when the spot rate exceeds the rate of return implied by the forward rate. For instance, if the forward rate, at the beginning of the period, is equal to 1.6, and the spot rate is currently at 1.65, then:

Forward implied return = (1.6/ 1.65) – 1 = -3.03%

If the spot rate at the end of the period equals 1.62, then:

Currency surprise = [(1.62 / 1.65) – 1] – (-3.03%) = 1.21%

The currency surprise is also known as a forward surprise.