A survey of announcement effects on foreign exchange returns

Abstract

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 micro - structure, 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. © 2010, The Federal Reserve Bank of St. Louis.