Bank of England Interest Rate Announcements and the Foreign Exchange Market

Michael Melvin, Christian Saborowski, Michael Sager and Mark P. Tayor
Additional contact information
Mark P. Tayor: Warwick Business School and Centre for Economic Policy Research

International Journal of Central Banking, 2010, vol. 6, issue 3, 211-247

Abstract: Since 1997, the Bank of England Monetary Policy Committee (MPC) has met monthly to set the UK policy interest rate. Using a Markov-switching framework that incorporates endogenous transition probabilities, we examine intraday, five-minute return data for evidence of systematic patterns in exchange rate movements on MPC policy announcement days. We find evidence for non-linear regime switching between a high-volatility, informed trading state and a low volatility, liquidity trading state. MPC surprise announcements are shown to significantly affect the probability that the market enters and remains within the informed trading regime, with some limited evidence of market positioning just prior to the announcement.

JEL-codes: E42 E44 F31 (search for similar items in EconPapers)
Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://www.ijcb.org/journal/ijcb10q3a7.pdf (application/pdf)
http://www.ijcb.org/journal/ijcb10q3a7.htm (text/html)

Related works:
Working Paper: Bank of England Interest Rate Announcements and the Foreign Exchange Market (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ijc:ijcjou:y:2010:q:3:a:7

Access Statistics for this article

International Journal of Central Banking is currently edited by Loretta J. Mester

More articles in International Journal of Central Banking from International Journal of Central Banking
Bibliographic data for series maintained by Bank for International Settlements ().