The Information Content of Trump Tweets and the Currency Market

Abstract

Using textual analysis, we identify the set of Trump tweets that contain information on macroeconomic policy, trade, or exchange rate content. We then analyze the effects of Trump tweets on the intraday trading activity of foreign exchange markets, such as trading volume, volatility, and FX spot returns. We find that Trump tweets reduce speculative trading, with a corresponding decline in trading volume and volatility, and induce a bias reflecting Trump’s (optimistic) views on the U.S. economy. We rationalize these results within a model of Trump tweets revealing economic content as a public signal that reduces disagreement among speculators.