The Fed: history of 7 meetings and EURUSD reactions
January 27th – 28th
For the first out of seven FOMC meetings 2015 there were no major announcements expected. From the very beginning of the year Yellen expressed that a change in policy should not be expected in January or March 2015. Hence the published statement showed no substantial changes to the previous one. The meeting on the 28th of January ended with a drop in expected market inflation and a citation of a stronger job market. Since the morning before the FOMC statement was characterized by a surge in EURUSD, this view was later revised as it seemed like the EURUSD got a bit ahead of itself. Consequently EURUSD declined slightly from 1.1335 to 1.1280 after the Fed statement.
March 17th – 18th
The pre-decision time was shaped by an overbought dollar. The consensus expected that the “patient” phrase would be dropped out of the statement, making room for a rate hike in June. Although the FOMC did exactly what the markets expected, dropping “patient”, it revised its inflation and the growth outlook downwards. Therefore the Fed dumped expectations of a future interest hike and increased uncertainty. This shifted market sentiment and EURUSD experienced a significant rebound from around 1.0604 up to 1.0820 as the dovish FOMC diminished the strong bullish positioning in the US dollar.
April 28th – 29th
Before the meeting the dollar was under strong pressure, losing approximately 1% against the EUR and 2% against the AUD. The FOMC statement was pretty much what the market was expecting. The language used was targeted to give the members a maximum of flexibility during the following meetings, thus not ruling out the liftoff in June. Nevertheless the markets expected the September hike to be the base case scenario. For a very brief moment the USD recovered some of the losses it incurred in the earlier part of the day. At the end however EURUSD continued to rise since the Fed did not hint any willingness to raise interest rates soon, therefore the European currency continued to strengthen against the US dollar from 1.0970 up to 1.1132.
June 16th – 17th
It seemed like the Fed was a bit frightened to make an important move towards raising rates in September. After the upbeat data from May it was broadly expected that the FOMC will communicate it`s will to hike in September, however this did not happen. Furthermore the Board moved its expectations during the meeting which made a further dollar appreciation difficult. The message for the market at the end was that the Federal Reserve did not change interest rates and it was everything but certain about rising rates in September. After the FOMC decision the EURUSD moved sharply higher from around 1.1255 to nearly 1.1417.
July 28th – 29th
During the morning the USD was marginally stronger. Once the FOMC published its statement it become pretty much obvious that it was basically the same one as in June. So not only there was no interest rate change in July, but also no signal for a hike during the September meeting as well. They stressed that their decision would be highly data-dependent and that it wanted to see improvements before taking a decision. Nevertheless the statement referred to the job market growth as solid and that the housing market showed additional improvements. This indicated that the FOMC wants to see some further job market improvements before hiking rates and that a September hike was still on the table. After the release EURUSD showed a very short spike upwards but reacted at the end to this continued policy of USD tightening with a drop from 1.1043 to around 1.0958.
September 16th – 17th
After the pair lost ground from a dovish Draghi decision beforehand, it was Yellen`s turn to be dovish. Even though Yellen showed that a hike for 2015 was still on the table the markets took the message very dovish letting the dollar slip against quite a few currencies. Especially against the EUR the dollar took quite a big hit, sending EURUSD up from 1.1288 to over 1.140 after the FOMC decision.
October 27th – 28th
Before the Fed´s meeting the EUR received quite some kicks. EURUSD fell remarkably after the ECB indicated that further easing was on the table for December, including possible rate cuts. During the same time the Fed indicated the possibility of a hike, marking a rather weak EURUSD as the starting point before the FOMC meeting. Once the Fed announced that it was going to consider a rate change at the next meeting the Greenback enjoyed a boost against other currencies, while the Euro was among the most affected currencies. EURUSD dropped sharply, losing more than a hundred pips from 1.1068 down to 1.0960 in a few minutes.