Intraday euro exchange rates and international macroeconomic announcements

Kevin Evans and Alan Speight

The European Journal of Finance, 2011, vol. 17, issue 2, 83-110

Abstract: This paper considers a 19-month sample of 5-min returns for three euro exchange rates, and provides an analysis of the news impact effects associated with the unexpected component of a wide range of international macroeconomic announcements. Our findings reveal that US news relating to leading indicators causes the most pronounced reactions in euro exchange rate returns. The few statistically significant non-US announcements identified relate primarily to Eurozone labour costs and German business expectations. However, the unexpected elements of interest rate announcements are not significant determinants of euro exchange rate volatility, indicating that it is the announcements of interest rates that cause jumps in exchange rates, quite apart from any actual information surprise delivered by those announcements. The analysis also shows evidence of asymmetric responses of exchange rates to good and bad news, indicating that positive surprises in poor economic climates are strong influences on short-term returns. Furthermore, impact response coefficients and the contribution of news announcement effects on daily price variation are found to vary across the sample and to depend on three factors: the magnitude of news surprises; the underlying economic conditions conveyed by news announcements; business cycle turning points as represented by switches from bad news to good news (and vice versa).

Keywords: high frequency data; exchange rates; macroeconomic news announcements; asymmetry; realised volatility (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (5)

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DOI: 10.1080/13518470903448457

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