Bank of england interest rate announcements and the foreign exchange market

Since , the Bank of England Monetary Policy Committee MPC has met monthly to set the UK policy interest rate. We examine evidence of systematic patterns in exchange rate movements on MPC days over the first decade of operation of the MPC.

Daily data reveal significant differences in volatility on the last of three meeting days when the interest rate announcement surprises the market. Intraday, five-minute return data are then used to provide a microscopic view. We use a Markov-switching framework that incorporates endogenous transition probabilities, which allows for an interesting alternative characterization of macroeconomic news effects on the foreign exchange market. We find evidence for non-linear regime switching between a high-volatility, informed-trading state and a low-volatility, liquidity-trading state.

MPC surprise announcements are shown significantly to affect the probability that the market enters and remains within the informed trading regime, with some limited market positioning just prior to the announcement.

Bank of England Interest Rate Announcements and the Foreign Exchange Market

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Note that these files are not on the IDEAS site. Please be patient as the files may be large. Poschingerstrasse 5, Munich Phone: Related research [Other version s available] Keywords: Find related papers by JEL classification: E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy F31 - International Economics - - International Finance - - - Foreign Exchange References References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile , click on "citations" and make appropriate adjustments.: Real-Time Price Discovery in Foreign Exchange ," American Economic Review , American Economic Association, vol.

Real-Time Price Discovery in Foreign Exchange ," NBER Working Papers , National Bureau of Economic Research, Inc. Real-Time Price Discovery in Foreign Exchange?

Real-Time Price Discovery in Foreign Exchange ," Working Papers , Duke University, Department of Economics. Real-Time Price Discovery in Foreign Exchange ," Working Papers , University of Pennsylvania, Wharton School, Weiss Center. Taylor, Mark P, The Response of Asset Prices to Monetary Policy Actions and Statements ," International Journal of Central Banking , International Journal of Central Banking, vol.

The Response of Asset Prices to Monetary Policy Actions and Statements ," Macroeconomics , EconWPA. The Response of Asset Prices to Monetary Policy Actions and Statements ," Computing in Economics and Finance , Society for Computational Economics. The Response of Asset Prices to Monetary Policy Actions and Statements ," MPRA Paper , University Library of Munich, Germany. Different Strategies, Same Effectiveness? Sound and Fury Signifying Nothing? The Microstructure of Foreign Exchange Markets, pages National Bureau of Economic Research, Inc.

News Releases and Volatility ," Journal of Finance , American Finance Association, vol. Are They in the Data and Do Markets Know It?

Survey of foreign exchange and over-the-counter interest rate derivatives markets | Bank of England

The Impact of Information Releases on Implied Volatility ," Journal of Financial and Quantitative Analysis , Cambridge University Press, vol. Full references including those not matched with items on IDEAS Citations Citations are extracted by the CitEc Project , subscribe to its RSS feed for this item.

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Semantic Similarity in Central Bank Communication and Market Volatility ," Staff Working Papers , Bank of Canada. Semantic similarity in central bank communication and market volatility ," Working Paper Series , European Central Bank. The impact of monetary policy on asset prices ," Staff Reports , Federal Reserve Bank of New York. ECB code words and euro exchange rates ," Journal of Macroeconomics , Elsevier, vol.

Louis, issue Sep, pages Technical Analysis ," Journal of Economic Literature , American Economic Association, vol. Technical Analysis ," The Warwick Economics Research Paper Series TWERPS , University of Warwick, Department of Economics.

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Related research [Other version s available]. References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile , click on "citations" and make appropriate adjustments.: Full references including those not matched with items on IDEAS.

Citations are extracted by the CitEc Project , subscribe to its RSS feed for this item. This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS. Access and download statistics. When requesting a correction, please mention this item's handle: Klaus Wohlrabe If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. How to help Corrections Volunteers Get papers listed Open a RePEc archive Get RePEc data. This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St.

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