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 caused 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,” LMAX added. “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.”