Macroeconomic Announcements and Private Information in the Foreign Exchange Market
29 Pages Posted: 7 Mar 2005
Date Written: February 2005
This study investigates the existence of private information in the spot foreign exchange market by examining the impact of macroeconomic announcements on banks' currency pricing behavior. Using 5 years of indicative GBP/USD data and 11 U.S. macroeconomic announcements, we find that the price information share gap between the top 10 banks and the rest of the banks increases during the announcements compared to benchmark time. This is supportive evidence for the existence of private information on fundamentals in foreign exchange markets.
Keywords: Market microstructure, foreign exchange rates, foreign exchange markets, macroeconomic news announcements
JEL Classification: F31
Suggested Citation: Suggested Citation