FOREX Investing: Central Bank Sentiment Data across the Globe

Abstract

With command over the Treasury’s dollar production (which are called Federal Reserve Notes) and interest rates, the Fed directly influences both the quantity and price of money more than any other actor. Given its central role in upholding the integrity of the currency, it makes sense to regard the central bank’s words not only as authoritative assessments of the state of the dollar, but also as catalysts for market movement themselves. As sensible as this deduction seems, it is surprising to note how little this connection has been researched. Although numerous scholars—especially since the financial crisis—have evaluated the role of central bank communications in the financial markets and the effect of those communications on currencies, money itself, as noted German economist Marcel Fratzscher explains, has yet to be widely explored:

While there is broad agreement that actual [foreign exchange] purchases or sales may affect exchange rates under certain conditions […], hardly any work has been done on the issue of whether oral interventions may be effective, apart from [Jansen and de Haan’s work] and [Fratzscher’s work]. (Fratzscher 2008, 1652)