The big day is finally here. The Federal Reserve has a 95% of hiking interest rates by 0.25%, and will also announce its forecasts for the U.S. economy over coming months.
Markets have been quiet ahead of the release, even though some data was released a little earlier that was slightly negative for the U.S. economy, leading to a slight fall in the value of the U.S. Dollar.
There are a few points to keep in mind if you are planning to trade soon after the releases are announced tonight – by the way, don’t forget Janet Yellen’s press conference which will take place shortly afterwards, in which the journalists are bound try to lure her into making comments which could annoy Donald Trump! Seriously, her comments in the presser can move the markets, so be careful. You might want to wait until after the presser is over before entering any trades.
1. If for any reason the FOMC does not make the rate hike, the Dollar is bound to fall sharply, and follow through for a while. It is extremely unlikely to happen, but would be a great trade opportunity if it did.
2. The FOMC’s economic projections are going to be the crucial factor as well as any comments from Yellen. The logic here is simple: better than expected is good for both the U.S. Dollar and the stock market.
3. The trade is all about the U.S. Dollar.
4. The currencies that have tended recently to benefit the most from a weakening USD are the New Zealand, Canadian and Australian Dollars, and to a lesser extent the British Pound.
5. The currencies that have tended recently to depreciate the most against a strengthening USD are the Japanese Yen, and to a lesser extent Swiss Franc and Euro.
Good luck!
