The fake headline

[Fairman]

The fake headline

A false headline hits a social network or a wire. The currency jumps. A few minutes later, the story is denied, and the price returns.

These events are rare but instructive. They show how fast price responds to information, including false information, and how little time there is to verify.

Sources of false headlines include hacked accounts, parody posts mistaken for real ones, and errors by news services. A wrong number published by mistake can move markets until it's corrected.

Verification is difficult in the moment. A second source helps. If the move is only on one headline service and not confirmed elsewhere, caution is wise.

An abnormal move in a single pair, without matching action in correlated instruments, is another hint. A real macro event usually shows up in bonds, equities, and several currencies.

The best response to a suspicious spike may be to wait. The cost of missing a trade is small. The cost of getting trapped is not.

Before acting on a surprising headline, how is it verified?