Researchers have long studied the reaction of foreign exchange returns to macroeconomic announcements in order to infer changes in policy reaction functions and foreign exchange micro­structure, including the speed of market reaction to news and how order flow helps impound public and private information into prices. These studies have often been disconnected, however; and this article critically reviews and evaluates the literature on announcement effects on foreign exchange returns.Foreign exchange

Christopher J. Neely

S. Rubun Dey

Research Papers in Economics

English

A Closer Look at the Sensitivity Puzzle: The Sensitivity of Expected Future Short Rates and

A Note on Economic News and Intraday Exchange Rates.”

A Survey of Announcement Effects on Foreign Exchange Volatility.” Unpublished manuscript, Federal Reserve Bank of Saint Louis,

An Efficient Method of Estimating Seemingly Unrelated Regressions and Tests for Aggregation

Announcement Effects and Seasonality

Asymmetric Impact of Trade Balance News on Asset Prices.”

Asymmetries and State Dependence: The Impact of Macro Surprises on Intraday Exchange Rates.” Unpublished manuscript,

Balance of Trade Announcements and Asset Prices: Influence on Equity Prices, Exchange Rates, and Interest Rates.”

Balance of Trade Announcements and Movements

Changes in the Federal Reserve’s Inflation Target: Causes and Consequences.”

Communicating with Many Tongues:

Deficit Financing Announcements and Asset Prices.”

Do Australian and the U.S. Macroeconomic News Announcements Affect the USD/AUD Exchange Rate? Some Evidence from

Do Currency Markets Absorb News Quickly?”

Do Federal Reserve Policy Surprises Reveal Superior Information about the Economy?” Contributions to Macroeconomics,

Does the Currency Board Matter?

Dollar Strengthens on U.S.

Domestic or U.S.

Economic News and Bond Prices: Evidence from the U.S.

Economic News, Exchange Rates, and Interest Rates.”

Efficiency Aspects of Exchange Rate Response to News: Evidence from U.S. Employment Data.”

Efficient Capital Markets: A Review of Theory and Empirical Work.”

Empirical Exchange Rate Models of the Seventies: Do They Fit Out of Sample?”

Exchange Rate Dynamics.

Exchange Rate Economics: Where Do We Stand?”

Exchange Rate Forecasting, Order Flow and Macroeconomic Information.”

Exchange Rate Market Efficiency and

Exchange Rate Response to Macro News: Through the Lens of Microstructure.” Working paper,

Exchange Rates and ‘News’: A Multi-Currency Approach.”

Exchange Rates and Fundamentals: Footloose or Evolving Relationship?”

Exchange Rates and Fundamentals: New Evidence from Real-Time Data.”

Exchange Rates and the ‘News’: Some Evidence Using U.K.

Exchange Rates, Interest Rates and Current Account News: Some Evidence from

Expectations and Exchange Rate Dynamics.”

Flexible Exchange Rates, Prices and the Role of ‘News’: Lessons from the 1970s.” Journal of Political Economy,

Forecasting EMS Realignments: What Do We Know?” Federal Reserve Bank of St. Louis Review, September/October

Foreign Exchange Microstructure: A Survey,”

How Is Macro News Transmitted to Exchange Rates?”

How Markets Process Information: News Releases and Volatility.”

Identification Through Heteroskedasticity.” Review of Economics and Statistics,

Inflation, Indexation, and Inflation Persistence in the New Keynesian Phillips Curve.” American Economic Review,

Interest Rates, the Forward Premium,

International Market Response to Announcements of U.S.

Is Bad News about Inflation Good News for the Exchange Rate?” in

Jumps, Cojumps and Macro Announcements.” Working Paper No. 2007-032D, Federal Reserve Bank of St. Louis,

Macroeconomic News and Exchange Rates.”

Macroeconomic News, Order Flows, and Exchange Rates.”

Managing the Dollar: Has the Plaza Agreement

Market Anticipations of Monetary Policy Actions.” Federal Reserve Bank of St. Louis Review,

Market Perceptions of Federal Reserve Policy and the Weekly Monetary Announcements.”

Measurement of the Unexpected U.S. Trade Deficit.”

Measuring the Information Content of Stock Trades.”

Micro Effects of Macro Announcements: Real-Time Price Discovery in Foreign Exchange.” American Economic Review,

Monetary Policy and Financial Markets. Federal Reserve Bank of

Monetary Policy Tick-by-Tick.” Unpublished manuscript,

Money Supply Announcements and Foreign Exchange Futures Prices for Five Countries.” Southern Economic Journal,

Money Supply Announcements, Interest Rates, and Foreign Exchange.”

News from the U.S. and Japan: Which Moves the Yen/Dollar Exchange Rate?”

Noisy Macroeconomic Announcements, Monetary Policy, and Asset Prices,”

On the Unstable Relationship between Exchange Rates and

Price Formation and Liquidity in the U.S. Treasury Market: The Response to Public Information.”

Rational Inattention: A Research Agenda.”

Real-Time Price Discovery in Stock,

Rules and the Deutschmark-Dollar Real Exchange Rate.”

Shocks and Frictions in U.S.

Some Anomalous Evidence Regarding Market Efficiency.”

Testing for the Constancy of Parameters Over Time.”

The ‘Rationality’ of Money Supply Expectations and the Short-Run Response of Interest Rates to Monetary Surprises.”

The Dynamic Interaction of Trading Flows, Macroeconomics Announcements and the CAD/USD Exchange Rate: Evidence from Disaggregated Data.” Federal Reserve Bank of St. Louis Working Paper 2008-006C,

The Effects of Macroeconomic News on High Frequency Exchange Rate Behavior.”

The Employment Report and the Dollar.” Federal Reserve Bank of New York Current Issues

The Giant Sucking Sound: Did NAFTA Swallow the Peso?” Federal Reserve Bank of St. Louis Review,

The High-Frequency Response of Exchange Rates and Interest Rates to Macroeconomic Announcements.”

The Impact of Macroeconomic Surprises on Spot and Forward Foreign Exchange Markets.”

The Impact of Monetary Policy on Asset Prices.”

The Large Scale Asset Purchases Had Large International Effects.” Federal Reserve Bank of St. Louis Working Paper 2010-018A,

The Long and Large Decline in U.S.

The Microstructure of the U.S. Treasury Market,”

The Money Supply Announcements Puzzle: Review and Interpretation.” American Economic Review,

The Rationality of Money Supply Expectations and the Canadian U.S. Exchange Rate Response to Money Supply Announcements.” Financial Review,

The Reaction of Exchange Rates and Interest Rates to News Releases.” Federal Reserve Board International Finance Discussion Paper No.

The Reaction of Exchange Rates to Economic News.” Economic Inquiry,

The Ricardian Equivalence Proposition: Evidence from Foreign Exchange Markets.”

The Short-Run Dynamics of the Price Adjustment to New Information.” Journal of Financial and Quantitative Analysis,

Time-Varying Liquidity in Foreign Exchange.”

Trade Balance News and Exchange Rates: Is There a Policy Signal?”

Trade Deficit Announcements and Exchange Rate Volatility: Evidence from the Spot and Futures

Trade Deficit Announcements, Intervention, and the Dollar.” Economic Letters,

When Did the FOMC Begin Targeting the Federal Funds Rate? What the Verbatim Transcripts Tell Us.”

Why Do Certain Macroeconomic News Announcements Have a Big Impact on Asset Prices?” Presented at the Applied Econometrics and Forecasting in Macroeconomics and Finance Workshop, Federal Reserve Bank of St. Louis,

Why Interest Rates React to Money Announcements: An Explanation from the Foreign Exchange

A survey of announcement effects on foreign exchange returns