macroeconomic

The elements of exchange rate are something market members, financial specialists, and even policymakers are interested in better understanding. Exchange rates are impacted by numerous factors financial as well as political. Currencies exchange rate are influenced by the appearance of new data and news. It seems much easier to discuss the impact of macroeconomic indicators on the exchange rate than the effect of the news, which is often random. In this thesis, we examine how some macroeconomic announcement has a significant impact on exchange rate in the short run and also study the effect of the macroeconomic factors in the long run. Macroeconomics is one of the most popular branches of economics in its general sense. It studies macro phenomena in the national economy on a large scale, such as: national income, capital formation, inflation, price levels, growth rate, changes in unemployment, and also focuses on the trends of the economy, and how the economy as a whole is progressing. Every day, newspapers, TV, and the radio report a wealth of economic information that has been released by statistical bureaus around the world. In order to interpret this information, we need to understand the different concepts and definitions used when collecting and reporting economic data (Gottfries,2013). One strain of this literature centers around the impacts of macroeconomic information declaration on different markets including Forex markets. Three macroeconomic variables are especially important: real gross domestic product (GDP), the inflation rate and the unemployment rate (Mankiw, 2010). The Forex market is one in which a nation’s currency is traded for that of another at a mutually agreed rate, and it is the largest market in the world. The price for the currency pairs moves always up or down, many factors impact the demand for one of the currencies and make this movement. Some movement happens when the announcements or the news are released, and that can make a move up or down for a few minutes, hours or for long run, monthly or yearly. In this study we will see the impact of macroeconomic announcements and news on the Forex market, where the announcement effect is defined as the impact of news on financial markets, and news is defined as the difference between the market’s expectation of the release and the actual release (Parker,2007). The study’s focus is on the U.K market and the data that I will use are from historical foreign exchange rates between the U.K Pound Sterling against the United States’ Dollar.

Technological development and the development of communications are some of the decisive means for the transmission of crises and the transmission of impact between local, regional and international economies, especially with their devastating effects. Therefore, the occurrence of a phenomenon or a pandemic will lead to effects for all countries, especially in the financial and monetary aspect. During the period covered by our study, the British economy in particular, and the European economy in general, underwent the impact of the announcement and measures for Brexit from the European Union, and the global economy also underwent the impact of a sudden event through the impact of the Corona pandemic. I conduct this study to shed light on some of the effects of these two events on the British and American economies and the GBP/USD exchange rate.

• Problem Statement

            The main purpose is to analyze the macroececonomic announcements and factors that impact GBP/USD exchange rates in the long run and short run, and study the effect of covid-19 and Brexit.

1.2 Objective