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Order flows, fundamentals and exchange rates

Iwatsubo, K. & Marsh, I. W. (2014). Order flows, fundamentals and exchange rates. International Journal of Finance and Economics, 19(4), pp. 251-266. doi: 10.1002/ijfe.1490


We examine the links between end-user order flows as seen by a major European commercial bank and macroeconomic fundamentals. We show that both exchange rate changes and flows are only weakly related to macroeconomic news announcements and hypothesize that 'the cat is already out of the bag' by the time the news is announced. Instead, order flows of financial and corporate customers reflect in real time the evolution of macroeconomies. The actions of the banks receiving the order flows in turn reveal the information to the market as a whole, which prices the exchange rate accordingly. By the time the news is announced, the exchange rate already contains the majority of the information.

Publication Type: Article
Additional Information: This is the peer reviewed version of the following article: Iwatsubo K. and Marsh I. W. (2014), ORDER FLOWS, FUNDAMENTALS AND EXCHANGE RATES, Int. J. Fin. Econ., 19, pages 251–266, which is published in final form at This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving.
Publisher Keywords: Exchange rates; order flow; fundamentals
Subjects: H Social Sciences > HG Finance
Departments: Bayes Business School > Finance
Text - Accepted Version
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