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Fed Preview: US Dollar, Dow & Gold Performance on FOMC Decision Days

Fed Preview: US Dollar, Dow & Gold Performance on FOMC Decision Days

Rich Dvorak, Analyst

FED MEETING PREVIEW: US DOLLAR, DOW JONES & GOLD PRICE PERFORMANCE AROUND FOMC INTEREST RATE DECISIONS

  • The latest FOMC interest rate decision is slated to cross the wires today, January 29 at 19:00 GMT and has serious potential to stoke volatility in the US Dollar, Dow Jones and Gold
  • Fed monetary policy updates have generally weighed negatively on US Dollar performance and positively on spot gold prices while the Dow Jones has a mixed trading history
  • Check out this US Dollar Forecast for comprehensive outlook on the US Dollar ahead of the January 2020 Fed meeting

The Federal Reserve is on deck to release its January 2020 FOMC interest rate decision today at 19:00 GMT. Details provided by the US central bank will likely be examined closely by market participants for clues on changes in language communicated by Fed officials regarding their relative hawkish or dovish leaning.

Traders are overwhelmingly expecting the Fed to leave its policy interest rate – the Federal Funds rate (FFR) – unchanged at a target range of 1.50-1.75%. As such, focus could be placed predominantly on forward guidance found in the FOMC press statement as well as follow-up commentary from Fed Chair Jerome Powell on recent balance sheet growth via repo operations.

Considering the material impact that changes in FOMC outlook typically has on market price action, it is important to take note of how US Dollar (DXY Index), Dow Jones Industrial Average (DJIA) and Gold (XAU/USD) have historically performed in response to Fed interest rate decisions.

HOW FOMC INTEREST RATE DECISIONS IMPACT MARKET PERFORMANCE – US DOLLAR, DOW & GOLD

Fed Decision US Dollar Dow Gold Performance Price Chart

Isolating price action in the US Dollar, Dow and Gold on FOMC decision days since 2015, it becomes evident that volatility tends to rise on balance in the run-up and aftermath of when the Fed press statement crosses the wires at 2:00 PM EST.

Also noteworthy is how Gold prices, on balance, have responded positively in response to FOMC interest rate decisions while the direction of the US Dollar has tended to drift lower. At the same time, the Dow Jones generally trades mixed and fluctuates considerably.

DXY INDEX – US DOLLAR PERFORMANCE & FED MEETINGS

US Dollar Index Price Chart Performance and Fed Decision

The largest bullish change in the US Dollar Index on FOMC decision days is 1.20% while the largest bearish change is -2.52% according to hourly data pulled over the last 5-years.

DJIA – DOW JONES INDUSTRIAL AVERAGE PERFORMANCE & FED MEETINGS

Dow Price Chart Performance and Fed Decision

The largest bullish change in the Dow on FOMC decision days is 1.51% while the largest bearish change is -2.54% according to hourly data pulled over the last 5-years.

XAU/USD – GOLD PRICE PERFORMANCE & FED MEETINGS

Gold Price Chart Performance and Fed Decision

The largest bullish change in spot gold on FOMC decision days is 2.59% while the largest bearish change is -2.11% according to hourly data pulled over the last 5-years.

Read More – US Dollar Volatility & FOMC Rate Decisions

-- Written by Rich Dvorak, Junior Analyst for DailyFX.com

Connect with @RichDvorakFX on Twitter for real-time market insight

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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