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Economic Events Outlook, Dec 19 – How to trade the FED Rate & FOMC Today?

Good morning, fellas.
Finally, we have a well-awaited fundamental on the table which never fails to trigger volatility in the market. I’m referring to the US FOMC and interest rate decision. Today, forex trading is all about FOMC Statement, Fed Rate decision and the Inflation data from the United Kingdom and Canada. Let’s check them out…

Federal Reserve Monetary Policy Decision – Is there going to be a Rate Hike?

For all the newbies, it’s one of the most important catalysts today as investors were waiting for this event for many months now. The highly-anticipated Federal Open Market Committee (FOMC) kicked off its two-day meeting on Tuesday.

At the conclusion of the two-day Federal Open Market Committee’s (FOMC) meeting, the central bank will decide whether or not to raise short-term interest rates for the fourth and final time in 2018. By the way, the economists are expecting the Fed to hike the interest rate by 25 base points from 2.25% to 2.50%. The interest rate hike isn’t specifically something which can buy bulls for the Greenback, but their plan for 2019 is more of a concern here.

Therefore, the market watchers will be paying close attention to Fed Chairman Jerome Powell’s speech afterward.

How To Trade FOMC Today?
Before we begin the discussion, let me remind that Fed has hiked its interest rate by 25 basis points in September, and that was the third time this year. Meanwhile, everyone is expecting another rate hike of 25 base points today. So, here’s the potential impact…

Impact of Fed Policy Decision

Interest Rate: Unchanged (Least Likely Outcome)

  • US Dollar – Sharp Selling// Bearish
  • Gold – Sharp Buying //Bullish
  • Stocks – Sharp Buying // Bullish

Interest Rate: Hike (Most Likely Outcome)
If the rate hike happens, the market isn’t going to be surprised as most of the traders have already priced in the rate hike and they will most probably do profit takings.

  • US Dollar – the Initial reaction is likely to be a spike in the dollar, and then bearish reversal.
  • Gold – Sharp dip and then bullish reversal is expected.
  • Stocks – A slight dip and then bullish reversal is expected.

GBP – CPI y/y

UK’s Consumer Price Index grew by 2.7% in August, dispensing growing inflationary pressures and helping justify the Bank of England’s interest rate hike for that month. Ever since, the UK economy hasn’t been able to get a good number. The inflation figures have fallen from 2.6% to 2.4% in November.

A slower CPI data of 2.3% is on the cards for December. While the Retail Sales are projected to jump by 0.3%, which is opposing the idea of an expected drop in the inflation rate. For newbies, a weaker inflation figure is considered bearish for the Sterling.

CAD – CPI y/y

The Canadian inflation is also suffering lately due to a drop in crude oil prices. In the month of October, the CPI figure came out at -0.4%, beating August’s gains of 0.5%. It eventually places pressure on the BOC (Bank of Canada) to keep the interest rates on hold.

December figures are expected to show a drop of -0.1% vs. 0.3% gain in November. This may keep the Loonie weaker ahead of the news release.

Fellas, it’s one of the crucial days from the trading point of view as most of the traders will go on Christmas holidays by the end of this week and today will be one of the busiest days from a fundamentals point of view. It can be a good opportunity to close the month with reasonable green pips in the pocket.

Good luck!

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Arslan Butt
Index & Commodity Analyst
Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics.His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker.His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.
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