Macroeconomic news, order flows and exchange rates

R Love, R Payne

Research output: Contribution to journalArticle (Academic Journal)peer-review

67 Citations (Scopus)


In textbook models of exchange rate determination, the news contained in public information announcements is directly impounded into prices with there being no role for trading in this process of information assimilation. This paper directly tests this theoretical result using transaction level exchange rate return and trading data and a sample of scheduled macroeconomic announcements. The main result of the paper is that even information that is publicly and simultaneously released to all market participants is partially impounded into prices via the key micro level price determinant—order flow. We quantify the role that order flow plays and find that approximately one third of price-relevant information is incorporated via the trading process.
Translated title of the contributionMacroeconomic news, order flows and exchange rates
Original languageEnglish
Pages (from-to)467 - 488
Number of pages22
JournalJournal of Financial and Quantitative Analysis
Volume43 (2)
Publication statusPublished - Jun 2008

Bibliographical note

Publisher: University of Washington, Michael G Foster School of Business

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