Pre-Announcement Drift for BoE, BoJ, SNB: Do Markets Move Before the Word Is Out?

5.June 2025

Introduction

We’ve previously examined how central bank policy decisions—particularly those by the Federal Reserve and the European Central Bank (ECB)—impact stock market behavior. The price drift in U.S. equities around the Federal Open Market Committee (FOMC) meetings is a well-documented phenomenon. Likewise, our research study of the ECB revealed a pre-announcement drift, underscoring the anticipatory nature of equity markets ahead of key policy events and the potential opportunities for trading strategies. But are such price drifts unique to the Fed and ECB? In this article, we broaden the scope to investigate whether similar market behavior occurs around monetary policy announcements by other major central banks: mainly the Swiss National Bank (SNB), the Bank of England (BoE), and the Bank of Japan (BoJ).

Background

Each institution operates within a unique economic and monetary framework, employing distinct policy instruments and communication strategies that influence market expectations and asset valuations. The SNB’s interventions, particularly in the context of its currency’s safe-haven status and negative interest rate policies, present a complex interplay between foreign exchange dynamics and domestic asset prices. Meanwhile, the BoE’s interest rate decisions have been shown to induce immediate and significant volatility in UK equity markets, with spillover effects observed in European indices, reflecting the interconnectedness of monetary policy and financial markets. The BoJ’s prolonged unconventional policies, including extensive asset purchases and forward guidance, generate multifractal interactions with stock prices, illustrating nonlinear and persistent effects on market behavior.

This study aims to rigorously analyze how the policy actions of these central banks influence stock market asset prices, focusing on the market reactions, and cross-market spillovers. By integrating daily data series analysis, we aim to deepen our understanding of the heterogeneous impacts of monetary policy across various financial environments. This approach complements our existing literature on the Federal Reserve and the European Central Bank. It fills a critical gap by systematically assessing the SNB, BoE, BoJ, BoA ,and BoC, providing a comprehensive perspective on the effects of global central banks in contemporary financial markets.

Data

The investment universe consists of the following U.S. ETFs:

iShares MSCI Japan ETF (EWJ)
iShares MSCI Switzerland ETF (EWL)
iShares MSCI United Kingdom ETF (EWU)

Also, our primary results are extended and we have taken a look at:

iShares MSCI Australia ETF (EWA)
iShares MSCI Canada ETF (EWC)

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The start date of our data samples was set to the first announcement data from central banks that correspond to replicated national indices, which is December 13, 2010. Data samples end in the current month, May 2025. The sources of announcements data are as follows:

Methods

The initial methods involved analyzing the distributions of returns around the dates of rate decision announcements, similar to the previous two central banks. The following histograms present the average returns for a day spanning three days before and after the announcement (EWJ for Japan, EWL for Switzerland, EWU for England).

The first preliminary results can be used to determine the most prevalent effect, so the pre-announcement run-up (significant performance during D-2 and D-1 days) works in all the central bank’s monetary policy meetings. It resembles the pre-ECB effect, present in the European counterpart. The two central banks in this sample, Switzerland and England, appear to exhibit a drift on the announcement day (D0), which is more pronounced in the U.S. than in Europe.

Since the Australian and Canadian central banks have distinct characteristics, we report the results from their investigations in the later section.

Trading Strategy Results

Now, our primary interest is to examine how international ETFs respond to the central bank announcements when be build a trading strategy around this effect. This strategy essentially involves front-running the announcements by holding ETFs during the days preceding the announcement release day. We present the results of this study in the following format: equity curves and a performance table.

The best-performing market is that of England, but it comes at the cost of the highest volatility and the most significant drawdown experienced during the unprecedented period of the COVID-19 pandemic, the 2020 stock market crash, several days at that time coincided with an emergency and already scheduled BoE meetings, which caused this unfortunate drawdown. Switzerland, apart from scrapping its peg with the EUR in 2015, is known for making very predictable and stable monetary decisions, which result in a small strategy’s performance and larger return lag behind the other two banks. Japan, maintaining its status as a haven currency, provides a balance between overall risk and return.

For comparison and the sake of completeness, we also consider whether the effect is pronounced on announcement day, as the monetary policy is being released. This is the effect, as in the case of the previously mentioned FED days. So, now the holding is only one single day, the monetary policy announcement.

Returns on announcement days for these three banks are not as strong as during the pre-announcement window.

Fundamental Basis and Theory for the Explanation of Market Anomaly

But how can we fundamentally explain occurrences of those behaviors? Do currency effects drive the drift component? Here, we have three ETFs: FXY, FXB, and FXF, which correspond to FX (currency) exposure of the local currency (Yen, Pound and Franc) against the U.S dollar. We’re using a simple column chart to analyze the distribution of returns during the same sample days before and after announcements, hoping it will provide a clue to explaining this pre-announcement puzzle.

The drift in currencies in days D-2 and D-1 is on average negative or flat. In conclusion, the drift in ETFs is not due to currency fluctuations but is primarily an intrinsic drift within the equity market.

We have now successfully tested the announcement and pre-announcement effects in three of the other central banks. However, there are also two other larger ones, the Canadian and Australian ones, where nothing presented here seems to manifest even remotely. Let’s take a brief moment to examine them, along with a hypothetical explanation of the prevailing causes of this outcome.

Canada + Australia

For these two central banks, histograms reveal a negative drift towards the day of release of central bank decisions, which is the different pattern if we compare it to FED, ECB, BoE, BoJ, or SNB. We shall try to hypothesize what those countries have in common that might influence such results.

The hypothesis is that commodity-producing countries such as Canada and Australia adopt distinct monetary policy frameworks compared to commodity-consuming economies like the US, EU, Japan, UK, or Switzerland, is well-founded in the literature on international macro-finance. Central banks in commodity-exporting countries face unique transmission mechanisms, where fluctuations in commodity prices directly affect their terms of trade, fiscal revenues, and, consequently, inflation dynamics, prompting monetary authorities to respond more sensitively to commodity market volatility.

In contrast, large economic unions and commodity-importing countries experience monetary policy primarily through the lens of equity markets and broader financial conditions, with less direct exposure to commodity price shocks. This dichotomy implies that monetary policy in commodity producers is more reactive to commodity price cycles. At the same time, in consumer economies, it is more aligned with equity market conditions and aggregate demand management.

Empirical studies confirm that net commodity exporters benefit from rising commodity prices, which can ease monetary constraints. In contrast, net importers face inflationary pressures requiring tighter policy responses, underscoring the differentiated monetary policy stance conditioned by a country’s commodity trade balance.

Conclusions

The empirical analysis robustly indicates that the D-2 plus D-1 strategy emerges as the superior pre-announcement trading framework for minor central banks relative to same-day (D0) executions. By systematically capturing the anticipatory market drift preceding central bank policy releases, this approach enabled significant excess returns, particularly in the environment shaped by the Bank of England. While the Bank of England presented heightened volatility and intermittent drawdowns—especially amid systemic market disturbances—its pre-announcement performance nonetheless outstripped that of the contemporaneously examined Swiss and Japanese markets. Notably, the Japanese market demonstrated a balanced risk-return profile, and Switzerland, with its more predictable policy framework, offered consistency despite a slightly retarded return profile. These findings highlight the potential for exploiting the predictable pre-announcement dynamics inherent in equity markets influenced by central bank directives.

Complementarily, our study confirms that the market reactions observed are not singular anomalies but are systematically present in the three central banks under investigation: Switzerland, the United Kingdom, and Japan. The statistical significance of pre-announcement drift across these distinct monetary regimes suggests that such phenomena may be deeply embedded within the market microstructure rather than being merely reflective of currency fluctuations or extraneous macro-financial shocks. Consequently, these insights not only refine our understanding of monetary policy transmission and market anticipation mechanisms but also offer a fertile ground for enhancing quantitative trading models.

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