How to Trade FOMC Decision

The whole world is patiently waiting for the decision of the FED regarding interest rate in the United States. Interest rates have been at a record long for longer than expected. The big question many of us keep asking “is this the right time”?

The labour market in the US has shown a massive improvement over the last couple of years and the economy is almost at full employment. Retail sales has picked up to an extent but not as expected, inflation remains really low, seems more like deflation and this might be a major factor that FED might consider to keep rates unchanged.

If the FED hikes rate, USD will get really strong and a will put downside pressure on commodity prices as well as commodity currencies. If rates remain unchanged, USD will be sold across board and commodities will get really strong.  The stock might have an initial negative reaction to rate hike, but will turn positive after a while.

However, the press conference after the rate decision is very important regardless of if they hike rates or not. We need to watch the tone of her voice and most importantly pick out major points. This is more likely to have a longer impact on the market than the rate decision.