Although the central bank meetings of all economies are extremely important, America’s Federal Open Market Committee meeting takes canter stage as the US Dollar is currently the world’s reserve currency.
Each month the committee meets to set rates and to give it’s pronouncement on current economic conditions and the effectiveness of current monetary policy, casting an eye forward to expectations of future economic conditions and adjoining monetary policy.
The committee is made up of members which vote at each meeting with “Hawkish” members those in favour of a rate rise and “Dovish” members those favouring a lowering of rates.
The statement released by the Committee is keenly scrutinized by traders looking for clues as to how the Central Bank will behave in future and even the most seemingly inconsequential of terminology can cause large market moves, as seen recently concerning the Fed’s usage and then removal of the term “patient”, regarding rate hikes.
FOMC meetings can cause huge market volatility as seen on March 18th 2015 when EURUSD spiked up 400 pips in a matter of minutes as markets perceived the meeting to be USD negative.
These Central Bank meetings are where we also learn about any changes in monetary policy, such as the announcement of quantitative easing. This is extremely important to currency traders and we explain this topic fully within our course.
Since the ECB announced their latest QE program on Jan 22nd of this year, EURUSD has fallen by over 600 pips
The key thing with all economic indicators and news releases is not just what the actual release means but how the market anticipates the release and subsequently reacts to it, this is where the trading opportunities are created. It can be extremely difficult for new traders seeking to trade news events as the volatility and uncertainty can be overwhelming, fortunately we have a fantastic suite of indicators which are perfect for trading news event