Discussion in 'Forex Encyclopedia' started by ibm'73, Nov 6, 2017.

  1. ibm'73

    ibm'73 Active Member

    The FOMC stands for the Federal Open Market Committee. Basically FOMC is highly trusted as a policy producer. But the policy will always be preceded by a very large rumors to the market could be shaken when the results of the announcement of the FOMC has not been published. This means the FOMC is one of the important announcements that traders must follow, especially those dedicated to the fundamentals. Then how the story of FOMC can be a trigger market?

    Structurally, the Federal Open Market Committee (FOMC) is a committee of high-level US central bank officials called the Federal Reserve (FED). The FOMC meets regularly to determine changes to US monetary policy, including interest rates, monetary stimulus, bond buying programs, and so on.
    Decisions announced after the FOMC meetings are valid only in the United States alone. However, investors will use it as a basis for their investment decision making. Therefore, the impact of the FOMC's ruling could affect the strengths of the US dollar, the rise and fall of stocks in US stock exchanges, bond yields, and so on. On the other hand, the magnitude of the US Dollar's role as the world's currency will create a domino effect that can extend to all corners of the universe.

    The impact of FOMC decisions can arise in near-spontaneous time, as well as the effects of long-term monetary policy. Traders who already know the new policy can immediately take action to buy or sell in the forex market. Because the effect is huge, then prices in the financial markets, including forex and stocks, often go ahead as soon as decisions are announced.

    Anyone is a FOMC Member

    The Federal Reserve officials who are entitled to vote at the FOMC meetings annually are permanent and rotating members. Permanent members will always be present and have voting rights in any FOMC meetings, as long as their positions within the Federal Reserve remain unchanged. While rotating members will change every year, although the people have not stepped down from their position in the US central bank.
    1. Permanent Member of FOMC.
    The FOMC meeting was chaired by the head of the Federal Reserve in office. For the year 2017, he is Janet Yellen. The new FOMC leadership will change if the head of the Federal Reserve changes, either by resigning, ousted by the US government, or by other causes. The FED chairman and the four-member Federal Reserve Board members are "permanent members of the FOMC".
    2. Rotating Member of FOMC.
    The FOMC's rotating members include FED leaders in New York, Philadelphia, Minneapolis, Dallas, Chicago, St. Louis, Kansas City, Boston, Cleveland, Richmond, San Francisco, and Atlanta. Every year, their seats in FOMC meetings alternate between getting votes and not getting alternate members. For example in the FOMC ranks of 2017, chairman of FED St. Louis, Kansas City, Boston, Cleveland, Richmond, San Francisco, and Atlanta) did not get the quota because the rotating seats were filled by FED leaders New York, Philadelphia, Minneapolis, Dallas and Chicago.

    When the FOMC Meeting is Organized

    FOMC meetings are usually done eight times a year, with schedules already released early in the year. The regular meeting will discuss the economic and financial conditions of the current period, and also decide to raise or lower the US interest rate.
    In addition, the FOMC meeting also discussed about the money supply in the community (money supply), and decided to buy or sell shares and government bonds. For example, to withdraw or minimize the money supply in the economic circulation, FED will conduct Open Market Operations (selling government bonds it holds). These matters relate to monetary policy.

    How the FOMC Decision Impacts
    There are two terms related to the FOMC decision you need to know to understand the impact of FOMC decisions:

    Hawkish, meaning the FOMC decision supports or tends to monetary tightening, an increase in interest rate (FED Rate / FFR), and or reduction of monetary stimulus; although at the meeting the forum did not raise interest rates. Hawkish pitched decisions usually encourage the strengthening of the US Dollar.
    Dovish, meaning the FOMC decision is leaning towards monetary easing, Fed rate declines, and / or the addition of monetary stimulus; although at the meeting the forum did not lower interest rates. Dovish pitched decisions usually push the US Dollar down.

    Markets typically react to the gap between recent FOMC meeting decisions compared to previous meeting decisions, or with estimates and estimates circulating among market analysts. For example, if the FOMC raises the FED Rate, whereas previously thought to be unlikely to change anything, the Dollar exchange rate will soar, while other currencies sag. Conversely, if the FOMC lowers the FED Rate, whereas initially suspected it will not act, then the Dollar exchange rate will decline.
    Nia likes this.
  2. Nia

    Nia Member

    thank you very much, this article is very interesting and lots of new insight for me.
  3. ibm'73

    ibm'73 Active Member

    thank goodness that this article gives a lot of feedback for you before you make a transaction
    Nia likes this.
  4. andengireng

    andengireng Member

    Many forex traders want to transact in the forex market based on news. They check the economic calendar to wait for key economic data scheduled to be released, such as non-farm payrolls, and prepare to trade in forex just before or shortly after one of the major events was announced. Of course if something unexpected happens, they should be alert at that moment, and maybe try to pass it.

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