Informed Traders, Intervention, and Price Leadership: A Deeper View of the Microstructure of the Foreign Exchange Market



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    • Department of Economics, Arizona State University, and American Express Company. I thank René Stulz, an anonymous referee, and participants at the HFDF-1 Conference in Zurich for valuable comments. Seung Ahn, Tim Bollerslev, and Michael Melvin provided useful suggestions on earlier drafts. I am grateful to Michel Dacorogna and the research team at Olsen & Associates for sharing their Reuters data.


This article identifies price leadership patterns in foreign exchange trading, with a focus on central bank intervention as an informational trigger for leadership positioning. Granger causality tests applied to DM/US$ spot rate quotes reveal Deutsche Bank as a price leader up to 60 minutes prior to Bundesbank interventionary reports. By the minus 25-minute mark, interbank quote adjustments become two-way Granger-causal. These results suggest that central bank activity is revealed in stages: first to the price leader, then to competitors, and lastly to the general public.