EUR/USD Exchange Rate Characterization: Study of Events

Jorge Carvalho (), Gualter Couto and Pedro Pimentel
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Jorge Carvalho: School of Business and Economics, University of Azores, 9500-321 Ponta Delgada, Portugal
Gualter Couto: School of Business and Economics and CEEAplA, University of Azores, 9500-321 Ponta Delgada, Portugal
Pedro Pimentel: School of Business and Economics and CEEAplA, University of Azores, 9500-321 Ponta Delgada, Portugal

Economies, 2022, vol. 10, issue 12, 1-14

Abstract: This study aims to evaluate the impact of major and minor changes in the Euro Zone and US interest rates on the EUR/USD exchange rate between 1 January 1999 and 31 December 2020. Therefore, twelve events are analyzed in this period, five related to changes in the US interest rate, six related to changes in the European interest rate, and finally, a single event in which both interest rates undergo an equal variation on the same date. The event study methodology was used, which, through the calculation of abnormal returns, makes it possible to evaluate whether there was a repercussion of the events on the value of the EUR/USD exchange rate. This methodology is used in several studies related to capital markets. The obtained results prove that there are abnormal returns with statistical significance on the event days, and, on the days that follow, changes in the interest rates have an impact on the EUR/USD exchange rate; however, there is no clear direction of the asset after the events occur.

Keywords: US dollar; event study; euro; foreign exchange market; interest rates (search for similar items in EconPapers)
JEL-codes: E F I J O Q (search for similar items in EconPapers)
Date: 2022
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