The Impact of Macroeconomic News on the Euro-Dollar Exchange Rate

This paper studies the effect of macroeconomic "news" (market now-cast errors related to the flow of data releases on macroeconomic fundamentals) on the daily USD/EUR exchange rate. I consider a large number of real-time macroeconomic announcements from both the US and the euro-zone, and the related market expectations as reported by Bloomberg. For the euro-zone I also study country level announcements for the four biggest economies (Germany, France, Italy, Spain). The results for the whole sample (1999-2012) show that both the "news" associated with euro-zone releases and those associated with US ones have a significant impact on the USD/EUR exchange rate. However, the effect of the euro-zone "news" has become larger since the 2008 crisis and it is now more sizeable than that of the US "news".