In this paper, we examine the intra-day effects of verbal statements and comments on the FX market uncertainty using two measures: continuous volatility and discontinuous jumps. Focusing on the euro-dollar exchange rate, we provide empirical evidence of how these two sources of uncertainty matter in measuring the short-term reaction of exchange rates to communication events. Talks significantly trigger large jumps or extreme events for approximately an hour after the news release. Continuous volatility starts reacting prior to the news, intensifies around the release time and stays at high levels for several hours. Our results suggest that monetary authorities generally tend to communicate with markets on days when uncertainty is relatively severe, and higher than normal. Disentangling the US and Euro area statements, we also find that abnormal levels of volatility are mostly driven by the communication of the Euro area officials rather than US authorities.

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This paper introduces new econometric tests to identify stochastic intensity jumps in high-frequency data. Our approach exploits the behavior of a time-varying stochastic intensity and allows us to assess how intensely stock market reacts to news. We describe the asymptotic properties of our test statistics, derive the associated central limit theorem and show in simulations that the tests have good size and reasonable power in finite-sample cases. Implementing our testing procedures on the S&P 500 exchange-traded fund data, we find strong evidence for the presence of intensity jumps surrounding the scheduled Federal Open Market Committee (FOMC) policy announcements. Intensity jumps occur very frequently, trigger sharp increases in realized volatility and arrive when differences in opinion among market participants are large at times of FOMC press releases. Unlike intensity jumps, volatility jumps fail to explain the variation in news-induced realized volatility.