Forex Analysis (Tue March 15 2011, 2:15pm NY Time EST) – US FOMC Rate Decision – Today, 06:37 PM

Federal Reserve will probably not surprise the market today. It is likely to keep the current Federal Funds rate unchanged while leaving the 600 Billion Dollar stimulus in place as economy is showing improvement.

The real market mover will probably be the accompanied statement, where Bernanke is expected to mention the recent improvements in Unemployment Rate (which is at 8.9%, the lowest in 2 years), Consumer Spending, and Consumer Confidence.

Bernanke is also expected to talk about recent surge in commodity prices, due mostly to the geopolitical concerns in Libya and possible interruption in oil supplies. Inflation is a also a very important concern to the Feds and by keeping interest rates near zero percent, it is definitely not a good combination while unemployment rate remains persistently high.

We should expect a reiteration of recent rhetoric from Bernanke’s speech in March 2. We should also expect little change with the phrase “…low levels of the federal funds rate for an extended period”, and in all likelihood, it will probably remain in this FOMC statement… we will probably not get any persistent market reaction…

However, if Bernanke were to surprise the market and discuss possible exit strategies or phasing out QE2, market will rush to buy USD, as it is a sentiment shared by many Fed officials (Dudley, Fisher, and Evans); on the other hand, if Bernanke were to concentrate on the negative and the sluggishness in market recovery, we’ll probably see USD under a bit of selling pressure.

The most likely scenario will be a limited market reaction today, and of course, unless you’ve traded this release before, I’d recommend staying out. This is a very advanced news event that is high impact enough to change market trend, and therefore important to every Forex trader…

So if you have never traded this release, just be present and watch market reaction while listening to your news wire service or Bloomberg TV and try to learn as much as you can, I’m sure you’ll thank me later

Historical Data & Chart For FOMC Rate Decision


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