Hello
Suppose there is a large news coming out in 15 minutes. Because it's positive for the dollar (let's say we're trading EURUSD) every bank and big player investor are going to go long. So they start making market buys for all they're worth, quickly consuming the existing limit sells (if there are any).
The result of that is that the ask price is raising madly (because noone will put in anymore limit sells because of the news). Now we come to the first question: will the bid price follow the ask price uptrend? Will people be willing to buy at higher prices thinking of the profits they can earne when the positive USD news come out. Or will the ask price remain on the same level, thus making the spread increasing.
If we move up to 1 second after the release, then if the banks are making their market buys, that'd mean that the price rise by itself. The banks won't be getting any profits, because they would have to buy at a very high price.
Man, this is complicated. Anyone care to explain detailed what actually happens during a news release on the interbank/EBS market?
Suppose there is a large news coming out in 15 minutes. Because it's positive for the dollar (let's say we're trading EURUSD) every bank and big player investor are going to go long. So they start making market buys for all they're worth, quickly consuming the existing limit sells (if there are any).
The result of that is that the ask price is raising madly (because noone will put in anymore limit sells because of the news). Now we come to the first question: will the bid price follow the ask price uptrend? Will people be willing to buy at higher prices thinking of the profits they can earne when the positive USD news come out. Or will the ask price remain on the same level, thus making the spread increasing.
If we move up to 1 second after the release, then if the banks are making their market buys, that'd mean that the price rise by itself. The banks won't be getting any profits, because they would have to buy at a very high price.
Man, this is complicated. Anyone care to explain detailed what actually happens during a news release on the interbank/EBS market?