Thereafter a decline sets in that is just as swift. Particularly on the tenth day and then starting from the seventh day before the meeting a steep ascent is evident. It can be discerned quite clearly how pronounced the pattern of EUR-USD around the Fed meeting is – in the run-up to the meeting, the euro appreciates significantly. The euro appreciates ahead of the meeting and declines thereafter! Source: Seasonax This time I have chosen a time span of 15 days before and 15 days after the FOMC meeting for a suitable illustration of the pattern associated with the EUR-USD pair.Īverage EUR-USD pattern 15 trading days before and after the second day of the FOMC meeting (2006 to 2021) It depicts the typical price moves of the euro against the US dollar around the Fed meeting. Take a look at the next chart in this context. The FED meeting impacts currencies significantly as well!ĮUR-USD is the most important currency pair. What is the relationship between FOMC meetings and prices in these other markets? However, it is not as widely known whether other major markets also exhibit typical patterns around Fed meetings. Lucca and Emanuel Moench, at the time economists with the New York Fed. Possibly you have already heard about the typical pattern of stock prices around FOMC meetings via an award-winning study by David O.
However, in the days after the FOMC meeting, prices begin to move sideways - the high expectations of investors were not justified, at least in relation to the post-announcement trend! The average increase over seven trading days was 0.51 percent, with the bulk of the advance taking place in the last two days before the announcement. Source: SeasonaxĪs the chart reveals, share prices are already rising well before the outcome of the Fed meeting is announced. In the two days leading up to the meeting, the S&P tends to rise particularly strongly. Thus it can be seen at a glance on the seasonal chart what the pattern of US stock prices typically looks like in the days surrounding the Fed's monetary policy meeting.Īverage performance of the S&P 500 Index in the 10 trading days before and after the second day of the FOMC meeting (2006 to 2021) The vertical orange line marks the day of the announcement. The horizontal scale shows the number of days before and after the second day of the FOMC meeting, the vertical scale the average move in percentage points. The chart was calculated over the past 15 years, during which 120 regular FOMC meetings have been held in total. The chart below shows the average performance of the S&P 500 Index in the 10 trading days before and after the second day of the FOMC meeting.
To this end we take a look at the typical pattern of share prices before and after the second day of the Fed meeting, when the committee's decisions are announced. However, while most investors and analysts are focusing on the outcome of the FOMC meeting, from a statistical perspective it is actually the time leading up to the meeting that is of importance for investors.īut how exactly does the FOMC meeting impact the markets? In order to answer this question we will first examine its effect on the S&P 500 Index. Market participants are awaiting the outcome of this meeting with bated breath, as it determines the monetary policy of the most influential central bank: will it cut interest rates or hike them? These decisions can set the course for the world's largest economy. Eight times every year, the Federal Open Market Committee (FOMC) of the Federal Reserve holds its regular monetary policy meeting.