The unpredictability of the FOMC rates decision
What you would learn in university: An interest rate hike increases demand, which would lead to higher prices.
What you actually see in the markets: The impact on price is not only dependent on the interest rate decision but also the message and sentiment during the press conference, priced in scenarios, future market expectations, economic projections, current price trends, global environment...
Overnight, the FOMC has just taken rates to a 22-year high at 5.50% and indicated further increases in September and possibly November (data dependent), and yet the immediate reaction is further weakness in the DXY.
Over the previous 6 rate decision releases (5 hikes and 1 hold), the reaction on the DXY has been mixed, either spiking up briefly before fading lower or showing little to no movement.
Scalping the news event is getting harder and potentially less profitable (unlike back in the years with Chair Bernanke). The approach short-medium traders should consider adopting is to let the noise clear out and only look to get their trades in days after the event.
What do you think?
What you actually see in the markets: The impact on price is not only dependent on the interest rate decision but also the message and sentiment during the press conference, priced in scenarios, future market expectations, economic projections, current price trends, global environment...
Overnight, the FOMC has just taken rates to a 22-year high at 5.50% and indicated further increases in September and possibly November (data dependent), and yet the immediate reaction is further weakness in the DXY.
Over the previous 6 rate decision releases (5 hikes and 1 hold), the reaction on the DXY has been mixed, either spiking up briefly before fading lower or showing little to no movement.
Scalping the news event is getting harder and potentially less profitable (unlike back in the years with Chair Bernanke). The approach short-medium traders should consider adopting is to let the noise clear out and only look to get their trades in days after the event.
What do you think?
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