Is Anyone Surprised? The High-Frequency Impact of U.S. and Domestic Macro Data Announcements on Canadian Asset Prices

Abstract: We show how Canadian interest rates, the CAD/USD spot exchange rate, and stock market returns react to both U.S. and domestic macro announcements using almost two decades of detailed high-frequency data. We find that Canadian macro announcements invoke greater responses in short-term yields, whereas U.S. macro announcements play an increasingly important role in the yield movements of longer-term assets. While U.S. macro announcements are relatively more important to explain changes in Canadian stock market returns, domestic macro announcements have a larger impact on the CAD/USD spot exchange rate. We discuss the significance of our results for understanding the factors that influence Canadian financial markets.