LMAX Group and Macro Hive Study FX Market Reactions to Key
Economic Events. The focus is on Federal Reserve meetings, NFP releases, and
CPI announcements, using high-frequency data to analyze millisecond-level price
changes. The aim is to help investors understand market reactions and adjust
strategies accordingly.
The report highlights the speed of price movements. It shows
that 60% of price changes within an hour happen within the first minute, with
30% occurring in the first two seconds after an economic release. This
underlines the importance of timely information in currency trading.
LMAX and Macro Hive Study FX Reactions
The report also examines the impact of the Federal Reserve’s
decisions on FX prices. Dovish outcomes tend to cause the most significant
immediate reactions. For example, EUR/USD increased by 0.2% following these
announcements.
Using millisecond-level data can help investors develop more
precise strategies. By analyzing fast price changes, traders can capture up to
90% of subsequent price movements, making their decisions more profitable.
Millisecond Data Enhances Trading Strategies
The analysis shows that sub-second price movements provide
insights into the aftermath of key US economic events, especially Federal Reserve
meetings. Using LMAX
Exchange data, it was found that prices react within milliseconds, with clear
patterns following hawkish or dovish Fed outcomes.
For EUR/USD, hawkish Fed meetings cause a sharp price drop
starting just 4 milliseconds after the announcement. The decline accelerates
between 30-50 milliseconds, reaching a 2 basis point drop before stabilizing
over the next hour.
Dovish meetings, in contrast, tend to push prices higher,
with similar timing in the opposite direction. Price movements in the first
0.05 seconds account for only 5% of the total decline after hawkish meetings.
Simulations suggest that a decline of more than 3 basis
points within 0.05 seconds is a strong indicator of a hawkish outcome,
capturing 85-95% of the following price action within the next hour. Waiting
for two seconds only captures 33% of the price movement.
FX Volumes Surge After Fed Meetings
Trading volumes spike immediately after Fed meetings. The
first 4 seconds see a more significant increase in volumes following hawkish
meetings compared to dovish ones, with around 40% of total trading volume
occurring in this short window.
LMAX clarified its method for determining mid-prices in
scenarios with limited trading activity, it stated: “To retrieve the closest
relevant mid-price, we find the most recent trade which occurs on or just
before an interval. On the given data, most mid-prices are taken 500ms or less
before the interval.”
“However, there are a small number of exceptions which are
several seconds from the interval. This is due to the lack of more recent
trading activity. Despite this, our analysis is not affected, since there is
little price action around these and there are very few instances in the data.”
LMAX Group and Macro Hive Study FX Market Reactions to Key
Economic Events. The focus is on Federal Reserve meetings, NFP releases, and
CPI announcements, using high-frequency data to analyze millisecond-level price
changes. The aim is to help investors understand market reactions and adjust
strategies accordingly.
The report highlights the speed of price movements. It shows
that 60% of price changes within an hour happen within the first minute, with
30% occurring in the first two seconds after an economic release. This
underlines the importance of timely information in currency trading.
LMAX and Macro Hive Study FX Reactions
The report also examines the impact of the Federal Reserve’s
decisions on FX prices. Dovish outcomes tend to cause the most significant
immediate reactions. For example, EUR/USD increased by 0.2% following these
announcements.
Using millisecond-level data can help investors develop more
precise strategies. By analyzing fast price changes, traders can capture up to
90% of subsequent price movements, making their decisions more profitable.
Millisecond Data Enhances Trading Strategies
The analysis shows that sub-second price movements provide
insights into the aftermath of key US economic events, especially Federal Reserve
meetings. Using LMAX
Exchange data, it was found that prices react within milliseconds, with clear
patterns following hawkish or dovish Fed outcomes.
For EUR/USD, hawkish Fed meetings cause a sharp price drop
starting just 4 milliseconds after the announcement. The decline accelerates
between 30-50 milliseconds, reaching a 2 basis point drop before stabilizing
over the next hour.
Dovish meetings, in contrast, tend to push prices higher,
with similar timing in the opposite direction. Price movements in the first
0.05 seconds account for only 5% of the total decline after hawkish meetings.
Simulations suggest that a decline of more than 3 basis
points within 0.05 seconds is a strong indicator of a hawkish outcome,
capturing 85-95% of the following price action within the next hour. Waiting
for two seconds only captures 33% of the price movement.
FX Volumes Surge After Fed Meetings
Trading volumes spike immediately after Fed meetings. The
first 4 seconds see a more significant increase in volumes following hawkish
meetings compared to dovish ones, with around 40% of total trading volume
occurring in this short window.
LMAX clarified its method for determining mid-prices in
scenarios with limited trading activity, it stated: “To retrieve the closest
relevant mid-price, we find the most recent trade which occurs on or just
before an interval. On the given data, most mid-prices are taken 500ms or less
before the interval.”
“However, there are a small number of exceptions which are
several seconds from the interval. This is due to the lack of more recent
trading activity. Despite this, our analysis is not affected, since there is
little price action around these and there are very few instances in the data.”
This post is originally published on FINANCEMAGNATES.
