A foreign-exchange forward fixes an exchange rate today for a currency transaction that will be settled on a later date. One party will then deliver a predetermined amount of one currency and receive the corresponding amount of another. Settlement takes place after the normal spot period, rather than immediately as in a spot transaction. The agreed rate is derived from the current spot rate and adjusted for the relative pricing of the two currencies. Businesses and financial institutions use forwards chiefly to remove uncertainty about the domestic-currency value of a future foreign-currency payment or receipt.
Source: European Central Bank (ECB) (source). This glossary entry is an independently worded adaptation of the cited information.