The impact of monetary surprises on exchange rates: Results from textual and high-frequency analysis

Jean-Charles Bricongne and Louis Marolleau
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Louis Marolleau: IAE Lille - IAE Lille University School of Management - Lille - Université de Lille

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Abstract: We investigate the immediate impact of monetary policy surprises on exchange rates by using a text indicator to detect them. A textual analysis method is applied to 746 business press articles. A database of monetary policy decisions is thus created. This database contains 510 decisions communicated between 2018 and 2023 for 11 countries with floating exchange rates and includes 78 surprises. To identify a causal effect, the impact of surprises on exchange rates is captured the minute the decision is communicated. This is done using high-frequency data. The amplitudes of exchange rate variations for surprises are compared with decisions qualified as "expected". The results show that, compared to expected decisions, monetary surprises increase the amplitudes of minute-to-minute variations at the communication time by 0.19 percentage point (p.p.) up to 0.39p.p. In order of magnitude, the amplitudes of minute-to-minute variations for monetary surprises are 100 to 1,000 times greater than the median ones calculated over a year for the currencies in the database. Due to demand effects, appreciation and depreciation of currencies are immediate in the currency market following macroeconomic announcements.

Keywords: Rate Parity; Monetary Policy; Communication Surprise; Text Analysis; Exchange Rate; Uncovered Interest; High-Frequency Data (search for similar items in EconPapers)
Date: 2025-09
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Published in Journal of International Money and Finance, 2025, 158, pp.103401. ⟨10.1016/j.jimonfin.2025.103401⟩

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Journal Article: The impact of monetary surprises on exchange rates: Results from textual and high-frequency analysis (2025)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05374458

DOI: 10.1016/j.jimonfin.2025.103401

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