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Trumping Forex Movements with Volume Data

There have been many reports of statements or actions made by Donald Trump having an effect on the stock market. Planet Money even built a bot that trades based on the US president’s many Twitter musings. Now the correlation between political events and market movement has been confirmed in the foreign exchange world.

As reported by Reuters, Quandl’s partner CLS Group recently published a report on the real-time correlations between significant political acts that took place during Trump’s first 100 days in office and currency market surges. After Trump ordered missile strikes on Syria, for instance, CLS data confirmed a massive spike (32bn) in FX-traded volumes.

Here is a sample of CLS Group’s other findings on Trump’s first 100 days in office:

  • The US dollar sold off against G10 majors after Trump and his administration accused foreign governments of unfair currency manipulation. This resulted in an $84 billion surge from the less than $50 billion average for the corresponding hour in 2016.
  • Trump announced in WSJ that he favored low-interest rates and that he would not label China a currency manipulator in a Treasury Department report. The result: a huge surge in FX-traded volumes. Because the interview was published late in the American trading session when usual trading activity and volumes subside, the spike in volume is directly linked to Trump’s comments.

What could an investor do with this data? It would seem, for instance, that FX volume indicates how much a given political event comes as a surprise to the market. On the one hand, an event not followed by a volume spike is likely to be priced in. On the other hand, an event followed by a spike is a surprise, which means that the market could react in unexpected ways.

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As previously discussed, the CLS FX volume database is the most accurate, comprehensive and timely gauge of currency trading volume ever published. If you are interested in testing out this data, please click the link below.

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