Bank of England Interest Rate Announcements and the Foreign Exchange Market

Since 1997, the Bank of England Monetary Policy Committee (MPC) has met monthly to set the UK policy interest rate. Using a Markov-switching framework that incorporates endogenous transition probabilities, we examine intraday, five-minute return data for evidence of systematic patterns in exchange r...

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Bibliographic Details
Main Authors:	Melvin, M., Saborowski, C., Sager, M., Taylor, M. P.
Format:	Journal Article
Language:	EN
Published:	2012
Online Access:	http://hdl.handle.net/10986/5293

id	okr-10986-5293
recordtype	oai_dc
spelling	okr-10986-52932021-04-23T14:02:21Z Bank of England Interest Rate Announcements and the Foreign Exchange Market Melvin, M. Saborowski, C. Sager, M. Taylor, M. P. Since 1997, the Bank of England Monetary Policy Committee (MPC) has met monthly to set the UK policy interest rate. Using a Markov-switching framework that incorporates endogenous transition probabilities, we examine intraday, five-minute return data for evidence of systematic patterns in exchange rate movements on MPC policy announcement days. 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 to significantly affect the probability that the market enters and remains within the informed trading regime, with some limited evidence of market positioning just prior to the announcement. 2012-03-30T07:32:10Z 2012-03-30T07:32:10Z 2010 Journal Article International Journal of Central Banking 1815-4654 http://hdl.handle.net/10986/5293 EN http://creativecommons.org/licenses/by-nc-nd/3.0/igo World Bank Journal Article United Kingdom
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	EN
geographic_facet	United Kingdom
relation	http://creativecommons.org/licenses/by-nc-nd/3.0/igo
description	Since 1997, the Bank of England Monetary Policy Committee (MPC) has met monthly to set the UK policy interest rate. Using a Markov-switching framework that incorporates endogenous transition probabilities, we examine intraday, five-minute return data for evidence of systematic patterns in exchange rate movements on MPC policy announcement days. 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 to significantly affect the probability that the market enters and remains within the informed trading regime, with some limited evidence of market positioning just prior to the announcement.
format	Journal Article
author	Melvin, M. Saborowski, C. Sager, M. Taylor, M. P.
spellingShingle	Melvin, M. Saborowski, C. Sager, M. Taylor, M. P. Bank of England Interest Rate Announcements and the Foreign Exchange Market
author_facet	Melvin, M. Saborowski, C. Sager, M. Taylor, M. P.
author_sort	Melvin, M.
title	Bank of England Interest Rate Announcements and the Foreign Exchange Market
title_short	Bank of England Interest Rate Announcements and the Foreign Exchange Market
title_full	Bank of England Interest Rate Announcements and the Foreign Exchange Market
title_fullStr	Bank of England Interest Rate Announcements and the Foreign Exchange Market
title_full_unstemmed	Bank of England Interest Rate Announcements and the Foreign Exchange Market
title_sort	bank of england interest rate announcements and the foreign exchange market
publishDate	2012
url	http://hdl.handle.net/10986/5293
_version_	1764394557340909568

Bank of England Interest Rate Announcements and the Foreign Exchange Market

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