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FOMC Past Trading Results

  • #1
  • First Post: Aug 8, 2006 8:31am Aug 8, 2006 8:31am
I tried to figure out how to approach today's FOMC interest rate announcement to trade it successfully but I found out that the market reaction to the announcement is almost impossible to be predicted. The following chart shows the GBPUSD changes in the first 4 quarters after the announcement. I saw similar disturbance in EURUSD.

Have you previously traded based on the announcement? Was it successful? What was your approach?

Please share the information with us to make a correct decision or may be we should just stay out of the market at that time.

Thanks,
Al
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  • #2
  • Aug 8, 2006 8:37am Aug 8, 2006 8:37am
Just for those of you who are not familiar with FOMC interest rate announcement refer to the following link and under FOMC click the "consensus" button. The button will become "report" after the release of the news.

http://www.bloomberg.com/markets/ecalendar/index.html
  • #3
  • Aug 8, 2006 8:47am Aug 8, 2006 8:47am
Quoting aparsai
I tried to figure out how to approach today's FOMC interest rate announcement to trade it successfully but I found out that the market reaction to the announcement is almost impossible to be predicted. The following chart shows the GBPUSD changes in the first 4 quarters after the announcement. I saw similar disturbance in EURUSD.

Have you previously traded based on the announcement? Was it successful? What was your approach?

Please share the information with us to make a correct decision or may be we should just stay out of the market at that time.

Thanks,
Al
aparsai,

Try approaching it from a different perspective. Look back at past data prior to the FOMC announcments.

The previous movement will have factored in the concensus numbers, if the rate is as consensus then Y, will happen if the announcment is a surprise rate increase then X will happen.

Don't forget that in a bear market all news will be bear biased, in a bull market all news will be bull biased.

BabeFX
  • #4
  • Aug 8, 2006 9:06am Aug 8, 2006 9:06am
BabeFX,

I'll definitely look into previous price actions once more and consider your comments. Thanks for sharing it with me.

Just for the sake of the current discussion the GBPUSD has been bullish since July 17 (look at the chart). On the other hand right now the market is in trading range since the NFP announcement on August 4. The consensus is that the interest rates remain at the 5.25% level. Now could you let me know what will probabely happen to the "cable" price if any of the following scenarios takes place?

Scenario one: The interest rate doesn't change.
Scenario two: The interest rate increases to 5.5%
Scenario three: The interest rate drops to 5.00%

Thanks,
Al


Quoting BabeFX
aparsai,

Try approaching it from a different perspective. Look back at past data prior to the FOMC announcments.

The previous movement will have factored in the concensus numbers, if the rate is as consensus then Y, will happen if the announcment is a surprise rate increase then X will happen.

Don't forget that in a bear market all news will be bear biased, in a bull market all news will be bull biased.

BabeFX
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  • #5
  • Aug 8, 2006 9:33am Aug 8, 2006 9:33am
A,

I think you have to factor in what was said, as well...

I think that the movements are indicative more of what is being said (about future hikes or pauses) than the actually hike itself. Most of the time, hikes or pauses (well, within the past year or so only hikes), have been expected, however the movement made after the FOMC was based more on clues to what the fed might do on the NEXT meeting.

At this point, a pauses is fully expected, however there will be clues as to whether or not this is a temporary pause (to appease whoever it may be, equity investors, politicians, the public...who knows) or an indeterminant pause (because inflation is "under control"...who knows).

Point is, I think the movements that price in the CURRENT expected hike are the news movements that clear up the pictures. I think the pundits have the risk of a hike is now only 25% where as last month, a hike was 75% eminent.

just my opinion.
  • #6
  • Aug 8, 2006 9:36am Aug 8, 2006 9:36am
For sure I am getting in later on the news release. Let me ask a question....anyone has the best method to trade the news? Lately it has been spiking up.50, 60 pips in less than one minute ...and when u enter your market order it is already too late...u get a later price...what should i do?

Thansk...
  • #7
  • Last Post: Aug 8, 2006 9:46am Aug 8, 2006 9:46am
Quoting sammymu323
For sure I am getting in later on the news release. Let me ask a question....anyone has the best method to trade the news? Lately it has been spiking up.50, 60 pips in less than one minute ...and when u enter your market order it is already too late...u get a later price...what should i do?

Thansk...
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