Effect of COVID-19 on the relationship between Euro/USD exchange rate and oil price

Abstract

We investigate the relationship between the Euro-United States Dollar (Euro/USD) exchange rate and oil futures price using intra-day data. The dataset is on hourly basis from 01/07/2019 to 30/11/2020 and 17-hour per day, from 01:00am to 17:00pm. By employing a predictive regression model, we observe oil price has influenced Euro/USD exchange rate but the evidence is very limited. Further, when we control for the effect of COVID-19, this relationship vanishes. Overall, COVID-19 shows some effect on the exchange rate during March 2020. • There is no predictive ability of oil price on Euro/USD exchange rate after controlling for COVID-19.

Keywords

• Predictability
• COVID-19
• Time-varying