A significant step-change in pricing that occurs when businesses pass on the accumulated impact of sharp foreign exchange movements to their customers at the beginning of a new campaign period. This phenomenon represents the acceptance by clients of price adjustments that reflect currency market changes that occurred during the previous period, essentially creating a pricing discontinuity or "cliff" between periods.

The FX ‘cliff’ plays a major role in both FX-driven firms and non FX-driven firms. In the first case, firms that use an FX rate in pricing while facing a competitive landscape may need to keep prices as steady as possible, for example, a South Korean exporter of commodity-type chemicals. In the second case, companies that desire to display the same prices to their customers for commercial reasons, period after period, for example, Netflix who has recently announced a layered FX hedging program.

This term denotes the impact of currency fluctuations on profit margins. The principal aim of layered FX hedging programs is to achieve a smooth hedge rate to mitigate the impact of ‘cliff’-related episodes.