Event Overview

⚡ Impact Level High
📈 Markets Affected 5
🎯 Trading Strategies 3
🏦 Recommended Brokers 3
The Federal Open Market Committee (FOMC) meets eight times per year to set US monetary policy. Their decisions on interest rates and quantitative measures move markets globally.

Why Fed Decisions Matter

The Federal Reserve:

  • Controls the world's reserve currency
  • Sets the benchmark for global interest rates
  • Signals future economic conditions
  • Influences asset valuations worldwide

    • Understanding Fed Policy

    #

    Rate Hikes (Tightening):

  • Typically strengthens the US Dollar
  • Pressures stock valuations
  • Increases bond yields
  • Can slow economic growth

    • #

    Rate Cuts (Easing):

  • Typically weakens the US Dollar
  • Supports stock valuations
  • Decreases bond yields
  • Stimulates economic growth

    • FOMC Meeting Structure

    Each FOMC meeting includes: 1. Rate Decision: The headline announcement 2. Statement: Policy language and outlook 3. Press Conference: Chair's Q&A (major meetings) 4. Dot Plot: Rate projections (quarterly)

    Market Reactions

    #

    Immediate (0-30 minutes):

  • Sharp moves in forex, especially USD pairs
  • Bond yields adjust quickly
  • Stock indices move on rate surprise

    • #

    Extended (hours to days):

  • Sector rotation based on rate path
  • Currency trends establish
  • Yield curve adjustments

    • Trading Fed Meetings

    #

    Pre-Meeting:

  • Position sizes should be reduced
  • Be aware of consensus expectations
  • Watch Fed Funds futures for market pricing

    • #

    During Announcement:

  • Extreme volatility for 15-30 minutes
  • Wait for initial spike to settle
  • Focus on statement language, not just rate

    • #

    Post-Meeting:

  • Trade the trend that emerges
  • Watch for follow-through in coming days
  • Monitor Fed speaker commentary

    • Historical Impact

    Average S&P 500 move of 1-2% on Fed days; USD pairs can move 100+ pips

    Affected Instruments

    EUR/USDUSD/JPYGoldS&P 500Treasury Yields

    Trading Strategies

    Fade the Initial Move

    High Risk

    Wait for the initial spike on rate announcement, then trade the reversal as markets digest the full statement.

    Timeframe: 30 minutes after announcement
    Instruments:
    EUR/USDUSD/JPYGold

    Trend Following

    Medium Risk

    Wait for dust to settle (1-2 hours), then trade in direction of the established move.

    Timeframe: 2 hours to 2 days after
    Instruments:
    USD pairsS&P 500

    Options Straddle

    Medium Risk

    Buy both calls and puts before the meeting to profit from large moves in either direction.

    Timeframe: Pre-meeting to post-announcement
    Instruments:
    SPY optionsQQQ options

    Key Dates to Watch

    Every 6 weeks FOMC Rate Decision High
    Quarterly Summary of Economic Projections (Dot Plot) High
    Ongoing Fed Speaker Events Medium
    Annual Jackson Hole Symposium High

    Risk Factors

    ⚠️ Unexpected rate decisions cause extreme volatility
    ⚠️ Statement language matters as much as rate decision
    ⚠️ Spreads widen significantly during announcements
    ⚠️ Stop losses may slip in volatile conditions
    ⚠️ Fed guidance can change quickly