Intraday Effect of News on Emerging European Forex Markets: An Event Study Analysis

45 Pages Posted: 31 Oct 2018

See all articles by Evzen Kocenda

Evzen Kocenda

Charles University in Prague - Institute of Economic Studies; Institute of Information Theory and Automation (Czech Academy of Sciences) - Department of Econometrics; CESifo; University of Regensburg - Institute for East and Southeast European Studies; University of Michigan at Ann Arbor - The William Davidson Institute

Michala Moravcová

Charles University in Prague

Date Written: 2018

Abstract

We analyze the impact of Eurozone/Germany and U.S. macroeconomic news announcements and the communication of the monetary policy settings of the ECB and the Fed on the forex markets of new EU members. We employ an event study methodology to analyze intra-day data from 2011–2015. Our comprehensive analysis of the wide variety of macroeconomic information during the post-GFC period shows that: (i) macroeconomic announcements affect the value of the new-EU-country exchange rates, (ii) the origin of the announcement matters, (iii) the type of announcement matters, (iv) different types of news (good, bad, or neutral) result in different reactions, (v) markets react not only after the news release but also before, (vi) when the U.S. dollar is a base currency the impact of the news is larger than in the case of the euro, (vii) announcements on ECB monetary policy result in stronger effects than those of the Fed, (viii) temporary inefficiencies are present on new-EU-country forex markets, (ix) new-EU-country exchange rates react differently on positive US news during the EU debt crisis when compared to the rest of the period.

Keywords: foreign exchange markets, intraday data, abnormal returns, event study, macroeconomic announcements, monetary policy settings, European Union, new EU members

JEL Classification: C520, F310, F360, G150, P590

Suggested Citation

Kocenda, Evzen and Moravcová, Michala, Intraday Effect of News on Emerging European Forex Markets: An Event Study Analysis (2018). CESifo Working Paper No. 7239. Available at SSRN: https://ssrn.com/abstract=3275413

Evzen Kocenda (Contact Author)

Charles University in Prague - Institute of Economic Studies ( email )

Opletalova St. 26
Prague, 11000
Czech Republic

HOME PAGE: http://kocenda.fsv.cuni.cz

Institute of Information Theory and Automation (Czech Academy of Sciences) - Department of Econometrics ( email )

Pod vodarenskou vezi 4
CZ-18208 Praha 8
Czech Republic

CESifo

Poschinger Str. 5
Munich, DE-81679
Germany

University of Regensburg - Institute for East and Southeast European Studies

Landshuterstr. 4
Regensburg, 93047
Germany

University of Michigan at Ann Arbor - The William Davidson Institute

724 E. University Ave.
Wyly Hall
Ann Arbor, MI 48109-1234
United States

Michala Moravcová

Charles University in Prague ( email )

Celetná 13
Praha 1, 116 36
Czech Republic

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