FOMC Meeting

“FOMC decision affects the strength of other currencies, as the US Dollar is currently the world’s currency reserve.”

Though the central banks of all of the world’s economies have their meetings, the one that is extremely important and has a direct impact on the currency of other countries is the American Federal Open Market Committee meeting. This is because the US Dollar is currently the world’s reserve currency.

The committee meets every month to set the rates and make pronouncement on current economic conditions. It also lets the public know how effective the current monetary policy is, at the same time, keeping focus on what to expect in the future from the economy and its monetary policies.

The committee is made up of two categories of members- the “Hawkish” (those who vote in favour of higher rates) and the “Dovish” (those who vote in favour of lower rates).

Traders always watch out for the statement the committee releases, keenly searching for clues and predicting future behaviour of the Central Bank.

For instance, the FOMC meetings caused huge market volatility as seen on March 18th, 2015 when EUR/USD hiked 400 pips in a matter of minutes, as markets perceived the meeting to be USD negative.

The CBN meeting always discloses any change in monetary policy, such as the announcement of quantitative easing. These decisions are always very important to the Forex trader.

For instance, the ECB in Jan 22nd, 2015, announced their latest QE program which led to the EUR to USD fall by over 600 pips. Keeping in mind that these decisions and announcement help a trader to stay on track and easily predict the market volatility of each currency following such announcements.