Are foreign exchange rates only affected by U.S. and domestic news?

Abstract

The purpose of this paper is to determine whether foreign exchange rates are affected by macroeconomic announcements from economies other than Unites States and homelands. The motivation is the economical interaction increase in current globalization trend, while most previous literatures focus on the influence of domestic economic information and the international influence of Unites States on the foreign exchange market.

This paper investigates respectively the responses of seven major currencies (EUR/USD, GBP/USD, USD/JPY, USD/CHF, USD/CAD, AUD/USD and NZD/USD) to macroeconomic announcements (Gross Domestic Product, Consumer Price Index and Unemployment Rate) from eight corresponding economies United States, Euro Zone, United Kingdom, Japan, Switzerland, Canada, Australia and New Zealand. The period covers from 1st January 2011 to 31st December 2015.

Evidences of the responses of exchange rates and trading volumes are provided in this paper. Firstly, most but not all foreign exchange rates are affected by U.S. and domestic macroeconomic announcements. Secondly, the foreign exchange rates are affected also by macroeconomic announcements from economies other than United States and homeland. Thirdly, the trading volumes emerge the peak effects around the release time of certain announcements, but the quantitative analysis cannot provide meaningful evidences.