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Time-varying effects of macroeconomic news on euro-dollar returns

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  • Ben Omrane, Walid
  • Savaser, Tanseli
  • Welch, Robert
  • Zhou, Xinyao

Abstract

We investigate the intraday reaction of euro-dollar exchange rate returns to the US and European macroeconomic news during a period that spans the global financial crisis and the Euro-zone debt crisis. First, we assess whether announcements’ impact is stable over time. We then use time-varying parameter path analysis to investigate whether the currency return response to macroeconomic news is sensitive to changes in market risk and interest rates. We find that news impact coefficients vary significantly over time. Our results also show that higher market risk measured by VIX dampens the effect of US news on euro-dollar returns.

Suggested Citation

  • Ben Omrane, Walid & Savaser, Tanseli & Welch, Robert & Zhou, Xinyao, 2019. "Time-varying effects of macroeconomic news on euro-dollar returns," The North American Journal of Economics and Finance, Elsevier, vol. 50(C).
    • Handle: RePEc:eee:ecofin:v:50:y:2019:i:c:s1062940818306454
    DOI: 10.1016/j.najef.2019.101001
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    1. Yan, Meng & Chen, Jian & Song, Victor & Xu, Ke, 2022. "Trade friction and price discovery in the USD–CAD spot and forward markets," The North American Journal of Economics and Finance, Elsevier, vol. 59(C).

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    More about this item

    Keywords

    Financial crisis; Exchange rates; Parameter path; Macroeconomic news; High-frequency data;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G1 - Financial Economics - - General Financial Markets

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