So the ECB made some comments and the Euro exchange rate jumped. OMG the FT is onit! Here's data from Bloomberg:
Well, actually, the exchange rate is now where it dropped to back in October when it was considered a loosening monetary policy:
The thing is that the exchange rate should fall on bad economic news (evaluated relative to the US for the Euro-dollar rate) since bad economic news should mean lower AD (relative to the US continuing along its path). The Euro-dollar exchange rate could also fall if the US was doing better than the EU.
Here's the IT model using M2 (in the footnote) (today's move is in black):
Nice Gaussian residuals ...