The Effect Of News Together With Main Factors On Euro Exchange Rate And Its Prediction Research

The birth of Euro is a pioneering work in the field of international finance and of epoch-making significance. It successfully changed the pattern of the international monetary system. Euro has become more and more important and indisputably turned into a serious rival to US dollar, whether regarded as transaction currency or reserve currency. Thus, euro exchange rate and its tendency have great effects on the economy of EU as well as the whole world. It fluctuated greatly since its birth: falling deeply, being strong continually and shifting back to value. What makes it change is quite complex. The traditional research pays attention to the analysis of main factors that affect the exchange rate, and there is also some research focused on the effect of news. In this paper, we analyzed the impact of main factors together with news respectively for monthly and quarterly data. We studied the comprehensive influence of interest rate, inflation rate, the total import and export growth rate and news related to European central bank or its leader’s statements to euro exchange rate in recent years, by utilizing regression statistical analysis method. The information of news, which came from Bloomberg, was collected and classified according to news’ content or headlines. We regarded news as virtual variables, and joined it into the original regression model. In order to study the impact of news, we compared the two models and found that the fluctuation of exchange rate can be more accurately described when combined traditional factors and news. Meanwhile, the effect of quarterly data was greater than monthly data. Finally, this paper took advantage of one-step delay regression method to make a forecast of exchange rate according to monthly data.