March 21 – Economic Event’s Outlook – Trading FOMC & Fed Fund Rate

Good Morning, fellas. Finally, the most awaited day of this quarter has arrived. The US FOMC is meeting today to decide the Fed Fund Rate. We all know they are expected to hike the interest rate. What we don’t know is how this is going to impact the forex, commodity and stock markets.

Trading the interest rate could be confusing as there might be a dual reaction in the market. Watch out for the potential impacts…

Major Economic Events To Watch Today

Great Britain Pound – GBP

Today at 10:30 (GMT), the Office for National Statistics will be releasing three labor market figures, which includes: 

Average Earnings Index 3m/y – A change in the price businesses and the government pay for labor, including bonuses. It’s forecasted to be positive at 2.6% vs. 2.5% in the last month.

Claimant Count Change – A change in the number of people claiming unemployment-related benefits during the previous month. It’s expected to be positive -3.1K vs. -7.2K last month. It seems like fewer people have filed jobless claims than the previous month. However, the unemployment rate is more significant to watch.

Unemployment Rate – One of the main measures of economic growth and BOE uses it to determine it’s future interest rates. Looking at the forecast, the unemployment rate is expected to remain unchanged at 4.4% vs. 4.4% beforehand. Any divergence will place pressure on BOE for hawkish or dovish stance in their policies.

US Monetary Policy – How to Trade?

Federal Funds Rate – Releasing at 19:00 (GMT) today. The FED is expected to hike the rate by 25 bp (base point) from 1.50% to 1.75%. If the Fed decides to hike the rate this will be the very first rate hike of 2018.

FOMC Press Conference – After 30 mins of Fed rate decision, the investors will be looking to Powell’s press conference for any clues about future rate hikes.

Fellas, let me remind you of few points:

During the news, the market will be extremely volatile and totally uncertain. It’s better to wait until the press conference is over before placing any positions.

Before & during the release, most of the brokers will increase the spread and this can hurt the scalpers. Beware of increased spreads before you enter the market.

If you are planning to place pending orders before the news, think again. There can be dual movement in the market today as the 1.75% is already “priced in”.

What To Expect From Dollar?

I think, initially, the dollar will spike higher on news and then there will be a sudden drop. So, beware of reversals in the market.

What To Expect From Bullion?

Commodities, like Gold and Silver, are already in a selling mode. Perhaps, the investors are pricing in the Fed rate hike. We can expect a dip in Gold and Silver on news release, but in the next moment, these might be skyrocketing.

What To Expect From Stock Markets?

Indices will be bullish on the rate hike unless the Fed Press Conference says something unfavorable, such as economic growth is sluggish and slags in labor market.

Wait, What If They Don’t Hike The Rate?

Until now, we are thinking of a rate hike, but what if Fed shocks the market with no rate hike?

The market will exhibit dramatically volatile behavior. This will be one of the best opportunity to sell the Buck and buy the Gold for a long-term. I personally wish for this as there will be a sure shot one sided movement.

That’s it for now, but stay tuned for hot trade setups today. All the best!