The Reaction Correlation Coefficient (RCC)

The Reaction Correlation Coefficient (RCC) gives us hard evidence of how a currency related to a given event has traded at various time points (15, 30 and 60 minutes) after being released in relation to that event’s Forecast Error.

The value is represented as a range between -100% and 100%. -100% means a perfect inverse relationship i.e. on all past instances a negative/positive FE resulted in the composite currency trading higher/lower after the release. 100% means a perfect direct relationship i.e. on all past instances a positive/negative FE resulted in the composite currency trading higher/lower after the release. The closer we get to 0%, the more random or independent the reaction of the composite currency is in regard to the outcome of the Forecast Error figure.