The traders who intend to make a profit through the capital in financial markets analyze the situation of the economic activities of countries when they make investment decisions. While taking into consideration the most critical news flows such as Unemployment, Growth, Inflation, and Policy Interest Rate, they also follow the messages given by the Central Banks of the countries regarding the status of inflation and interests. This approach has significant importance in shaping these expectations regarding these countries’ currencies gaining or losing value.
The world’s most important Central Bank, Fed appears here as a playmaker everyone pays attention to. This is because the steps that will be taken by the Fed regarding the economy affect each county’s dynamics directly, from Asia to Europe.
In the last meeting of 2018, Fed shared with the markets their expectations of two interest rate increases regarding 2019. Yet, the environment of uncertainty experienced in 2019 with some deterioration regarding the economic activity and this causing the inflation rate’s target range moving away from 2,0 % allowed the expectations regarding 2019 to change in Fed’s 2019, March meeting. The fact that a bank that was expected to have two interest rate increases didn’t have any thoughts about any interest in the rest of the year made it possible for the dollar to lose value and Oz Gold to gain significant value. Today, the markets bring up expectations of the Fed to cut interest rates in the remaining period of 2019 to the agenda. Therefore, the FOMC reports from the 18th and 19th of June and Fed’s president Powell’s speech have critical importance.
So, how should the Forex traders who buy and sell any financial assets understand and interpret the world’s most valuable player, Fed?
The most notable Fed meetings for the markets are the ones that are held in December, March, June, and September. This is because the FOMC members share their expectations regarding Unemployment, Growth, Inflation, and Policy Interest Rate in these meetings. These expectations include both the relevant year as well as the next two years. For example, in this meeting, the Fed will be sharing the expectations of the highly critical data regarding the rest of 2019. Fed will also share thoughts about 2020 and 2021. The long term expectations will be covered in this meeting as well. (See Picture 1)
The part in which the Fed shares its expectations for Unemployment, Growth, Inflation and Policy Interest Rate is called the Economic Projection (Picture 1). In this data set, the table where especially the interest expectations take place is called the Dot Plot (Picture 2). The Economic Projections shared by the world’s most important player, Fed, have significant importance for being able to affect the decision mechanisms of all the Central Banks. That is why the related results allow an effective image on asset pricings such as Gold, Yen, Sterlin, Oil and S&P500 and especially, Dollar.
After having the FOMC reports, the president (currently Jerome Powell) who manages the world’s most valuable player Fed shares a message with the markets. The president is responsible for explaining how the Fed perceives the markets currently and how it will take action accordingly. He is also responsible for bringing the markets together with the Fed by answering the press questions and explaining the institutional policies correctly.
The Reports of the Fed meetings which are anticipated eagerly by all the market players can be reached from the bank’s website. Here is the link for you. (Picture 3)
The graphics shared in the article are included in the application to allow a better understanding of the projections which are taken from the economic projections from the 19th and 20th of March.
To summarise, the traders who want to make a profit from the capital in financial markets make investment decisions via following the decisions of the world’s most valuable player, the Fed, and the instant pricing behavior, even the middle – long term expectations. For this reason, the meetings held in December, March, June, and September are important for traders.