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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

2020-04-29 17:32:00
Rich Dvorak, Analyst
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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, April 29 at 18:00 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 April 2020 Fed meeting

The Federal Reserve is on deck to release its April 2020 FOMC interest rate decision today at 18:00 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 of 0.00-0.25%. 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 asset purchases made by the central bank.

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The tone expressed around the sharpest GDP contraction in decades, and details on recent changes to monetary policy made by the Federal Reserve aimed at offsetting economic turmoil from the coronavirus pandemic, could be scrutinized as well.

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 US Dollar Dow Jones Gold Price Chart Performance on FOMC Interest Rate Decision

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

DXY Index Price Chart US Dollar Performance Fed Meeting

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.

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DJIA – DOW JONES INDUSTRIAL AVERAGE PERFORMANCE & FED MEETINGS

DJIA Price Chart Dow Jones Performance Fed Meeting

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.

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XAU/USD – GOLD PRICE PERFORMANCE & FED MEETINGS

Gold Price Chart Gold Performance FOMC Interest Rate 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.

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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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