Trading the News: Federal Open Market Committee (FOMC) Interest Rate Decision
The Federal Open Market Committee (FOMC) interest rate decision may spur a bearish reaction in the dollar (bullish EUR/USD) if the central bank remains reluctant to move away from the zero-interest rate policy (ZIRP).
What’s Expected:
Why Is This Event Important:Even though the Fed is widely expected to conclude its asset-purchase program at the October 29 meeting, we would need a more hawkish twist to the forward-guidance for monetary policy to favor further USD strength.
Expectations: Bearish Argument/Scenario
Release | Expected | Actual |
Non-Farm Payrolls (AUG) | 230K | 142K |
New Home Sales (MoM) (JUN) | -5.8% | -8.1% |
Housing Starts (MoM) (JUN) | 1.9% | -9.3% |
The dollar may come under pressure should we get more of the same from the Fed, and the greenback may face a larger correction over the remainder of the month should Chair Janet Yellen see greater scope to retain the highly accommodative policy stance for an extended period of time.
Risk: Bullish Argument/Scenario
Release | Expected | Actual |
Average Hourly Earnings (YoY) (AUG) | 2.1% | 2.1% |
Personal Consumption Expenditure Core (YoY) (JUL) | 1.5% | 1.5% |
Consumer Price Index ex Food and Energy (YoY) (JUL) | 1.9% | 1.9% |
Nevertheless, sticky inflation paired with the uptick in wage growth may spur a greater dissent within the committee and push the FOMC to lay out a more detailed exit strategy as the central bank looks to move away from its easing cycle.