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Monday October 28, 2019 - 15:08:00 GMT -

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Forex View: Expectations Will Drive the Reaction to the FOMC

Expectations Drive Markets

Financial markets not only trade on current events but are constantly looking ahead. This often sees markets trade on expectations of future events.

This is especially true in the current world of low/negative interest rates where there has been some resistance shown by ECB members to the latest stimulus package and interest rate cuts. This may be one reason why the EUR has staged a modest recovery despite further easing by the ECB as markets sense a reluctance to further easing by the central bank.

How About the Fed?

In its September 18 2019 statement, the FOMC said, … As the Committee contemplates the future path of the target range for the federal funds rate, it will continue to monitor the implications of incoming information for the economic outlook and will act as appropriate to sustain the expansion, with a strong labor market and inflation near its symmetric 2 percent objective….

The focus will therefore be on any changes in the statement that might shift market expectations of future monetary policy.

As I wrote in Forex View; How to Trade the FOMC Decision, the focus will likely be on expectations of future policy. As noted, this suggests a rate cut is about discounted, which will put attention on the accompanying statement and press conference. In this regard, there is a high risk that the Fed will alter its forward guidance to indicate that this could be it for now with further rate cuts less likely.

To guess what the Fed might say is just gambling. It is better to be aware of what is expected so you have a clue how to react once the FOMC rate decision and statement are released.

In any case, markets will continue to be driven by expectations (as opposed to actual policy changes), not just in the US but elsewhere as well. This is life in a low/negative interest rate world where the rate hike light is still distant at the end of the tunnel as currently it is a matter of when interest rates will find a floor rather than when they will eventually rise. Expectations are what will drive markets as this will be the focus following the FOMC decision.

If you are serious about forex and/or CFD trading you need to get access to the Amazing Trader and its High Odds Trading strategy. 

Jay Meisler, co-founder


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GVI Trading. Potential Price Risk Scale
AA: Major, A: High, B: Medium

Mon 27 May 2019
AAGB/US- Holiday
Tue 28 May 2019
A 14:00 US- Consumer Confidence
C 13:00 US- Case-Shiller
Wed 29 May 2019
A 08:55 DE- Employment
AA 18:00 US- BOC Decision
A 18:30 US- EIA Crude
Thu 30 Mar 2019
AAEZ/CH- Holiday
A 12:30 US- Weekly Jobless
Fri 31 Mar 2019
AA 10:00 EZ- Flash HICP
A 12:30 US- Personal Income, Spending, Deflator
AA 14:00 US- Final Univ of Michigan

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