Country News Sentiment Factors Predict Forex Prices

Abstract

In this study, we test a set of country macro sentiment indexes that measure the trailing sentiment on both scheduled and unscheduled economic and geopolitical news events. We develop a cross-over strategy in the FX market based on short to long-term news sentiment inflection points covering the seven major currency pairs. The sentiment indexes are proven to predict short-term price movements in the major currency pairs for up to several hours after an inflection point.