Understanding the fluctuations in the foreign exchange market

Abstract

Due to a development in technological advances and hence higher market efficiency, there has been the increase interest in connecting economic announcement to fluctuations in the market. This study tests the overall efficiency of macroeconomic announcements on exchange rates, primarily being the EUR/USD rate. Following various researches performed, this model serves as a continuation to where other researchers, concluded, by making use of higher frequency data with the aim to achieve more accurate results. The main objective of this study is to find any existing relationship, if any, between surprises in macroeconomic values in the European and United States markets. This by referring to the corresponding exchange rate by using major economic indicators and 1-minute tick rates.