Last week was very interesting for the markets, as we saw the releases of the US Inflation and Disney’s earnings report. So let's see what we should await this week!
The Fed’s meeting will drive the USD
What will happen?
The Federal Reserve will release its statement and announce its interest rate decision at 21:00 MT time. Then, at 21:30 MT time, the central bank will hold a press conference.
Each meeting of the regulator draws the attention of the trading community. The central bank has to comment on the recent data releases, give its estimate of the US economy and outline its plans for stimulus and interest rates. The better the US economic figures, the higher the pressure on the Fed to start normalizing policy. In the past weeks, America has released some decent numbers, so traders will sit nervously in front of their monitors waiting for Jerome Powell and his colleagues to give the market some signal.
How to trade on the Fed interest rate decision and press conference?
The logic is simple. If the Federal Reserve admits that the American economy is doing fine, the USD will strengthen. If it hints that the time to raise interest rates may come earlier than expected, the USD will strengthen. If the Fed becomes concerned with rising inflation, the USD will strengthen. If the actions of the US central bank are the opposite, the USD will weaken.
Let’s summarize these considerations:
- If the Fed is optimistic, the US dollar will go up.
- If the Fed is uncertain or cautious, the US dollar will go down.
Instruments to trade: EUR/USD, USD/JPY, GBP/USD, XAU/USD.
The United States will publish the Preliminary GDP on Thursday, May 26, at 15:30 GMT+3.
The Reserve Bank of New Zealand will publish a monetary policy report and make an update on the interest rate on May 25, at 05:00 GMT+3.
The Australian Bureau of Statistics will announce the updated Unemployment Rate and Employment Change data on Thursday, May 19, at 04:30 MT.