This paper examines two aspects of spot FX volatility. Using intra-daily quotation data on the Deutsche Mark/Dollar we simultaneously estimate the deterministic intra-daily seasonal pattern inherent in volatility and the effects of US macroeconomic announcements. The empirical specification and estimation technique is based on the Stochastic Volatility methodology contained in Harvey, Ruiz and Shephard (1994). Results conform with previous work, in that 'news' effects are strong and persistent, being felt for over one hour after the initial release time. Inclusion of an explicit seasonal is shown to be essential for the accurate estimation of other volatility components. Further estimations allow us to examine which particular pieces of US data move the markets. These result show that the most important statistics are those associated with the Employment and Mercantile Trade reports.
