CAD and GBP (and EUR summary)

It is not news that news moves financial markets. This blog will publish research on how, when, why, and which news moves what financial markets.

Again I look at the dataset from the Forex Resource Guide Excel Spreadsheet Version of News History 10/27/06. While a slightly less rigourous dataset than I usually use, it is an interesting comparison. This data uses a market expectation from surveys and the change in the exchange rate is a subjective measure. The data is also a bit sparse and so there are fewer questions that can be answered from it. Nonetheless, it provides an interesting comparison to my other results.

Since the votes from the last post were tied as to whether I should address the GBP or the CAD next I did both (it was a 0-0 tie ).

Unlike the EUR where a lot of announcements are statistically significant, for these currencies, there is only one significant announcement. For both GBP and CAD the news from the announcement itself (measured as actual minus expected) was significant in both cases.

For GBP the average move was 17 pips (t-stat 3.9, R² 0.24), but none of the announcements were important in explaining the currency moves after the announcements. Those included:

• CPI
• Current Account Balance (Quarter)
• GDP q/q
• Industrial Production
• PMI Manufacturing
• PPI Input s.a.
• Retail Sales
• Trade Balance (Visible)

The only announcement that was significant was the Trade Balance in the CAD model. The effect of the announcement was a move in the CAD of 24.6 pips (t-stat 1.9, R² 0.39). The effect of the news in this model was -1.42 (t-stat -4.3). Other announcements that were tested for the CAD were:

• Consumer Price Index (MoM)
• CPI ex Core 8 (MoM)
• GDP m/m
• Net Change in Employement
• Retail Sales
• Retail Sales (Ex Auto)
• Trade Balance

Bottom line for this dataset

Important announcements by currency:

• GBP – none more than another. Average news effect move 17 pips.
• CAD – Trade Balance (24.6 pips); Average news effect move -1.4 pips.
• EUR - GDP Annualized (37.7 pips); Change in Nonfarm Payrolls (25.1 pips); Existing Home Sales (-24.9 pips); PPI Ex Food and Energy (19.9 pips); Average news effect move -0.2 pips.