The results of our analysis can be summarized as follows. The biggest impact, in terms of the highest abnormal return in euro-denominated currency pairs, occurs on Purchasing Managers' Indices (PMI), the Information and Forschung (Ifo) index, and the gross domestic product (GDP) release. With respect to the U.S. dollar-denominated currency pairs, the highest abnormal returns are linked with the non-farm payroll (NFP) and GDP releases. The longest reaction in terms of significant abnormal returns after the news release can be traced to announcements of the PMI, Retail Sales, IFO, or Industrial Production. The exchange rates with respect to the U.S. dollar exhibit higher abnormal returns than euro-denominated currency pairs.
We distinguish the surprise element in the announcements by dividing the news into three clusters—good, bad, and neutral news—which are defined by the difference between the announcement and its expectation. Larger abnormal returns after Eurozone/Germany news announcements are in general linked with good news. Conversely, in the case of U.S. dollar-denominated exchange rates, larger abnormal returns are linked to bad news. The results also show that the values of statistically significant abnormal returns of the euro-denominated exchange rates are smaller, occur less often, and last for a shorter time than for U.S. dollar-denominated exchange rates. Finally, the segment of the new EU forex market where currencies are traded with respect to the euro is more efficient than its U.S. dollar-based counterpart.
Communications on the monetary policy settings show that the ECB communication matters. The CZK/EUR exchange rate exhibits the strongest and HUF/EUR the quietest reaction among euro-denominated exchange rates. The impact of Fed monetary policy changes on the new-EU-country currencies is present but is less significant than that of the ECB: both PLN/USD and HUF/USD depreciate after the Fed eases monetary policy but there is no statistically significant impact on the CZK/USD exchange rate.