Fed Meeting: When is it and what will happen?

Will the Fed raise interest rates?

The probability of the Fed raising rates 0.25%, or 25 basis points (bps), is 84.7% the day before the meeting, according to data taken from CME Group's FedWatch Tool at 5pm ET. Though the likelihood of an interest rate hike from the Fed is greater than not, the FOMC will decide whether or not to raise rates relative to how they view the economy outside of what the market projects.

The Fed tends to monitor inflation and employment as leading indicators for what they will do to interest rates, and the recent decline in inflation has traders wondering if this might be the last interest rate hike or if they will even hike at all. The regional banking crisis in the US has caused many to call for an end to more interest rate hikes that could further the problem.

How will the Fed meeting affect forex?

Interest rate hikes tend to result in appreciation in that region's currency, which could mean strength for the US dollar if the Fed does end up raising interest rates. Holding rates unchanged or cutting them could signal weakness for USD relative to major forex counterparts like euro, British pound, and Japanese yen.

Forex markets can be highly correlated to interest rate markets as higher interest rates in a region tends to result in greater demand for that region's currency; traders can employ the carry trade - buying currencies with higher interest rates while selling those with lower rates - in an attempt to profit from the interest payment for holding a position with 'positive carry' overnight. However, there is risk in the forex position moving against the trader by an amount exceeding the interest payment, which would result in a loss.

How to trade Fed meetings with forex

1. Choose the forex market you’d like to trade
2. Open an account to get started, or practice on a demo account
3. Choose your forex trading platform
4. Open, monitor, and close positions

You can trade forex markets like EUR/USD around the Fed meeting with an account from IG, however, it should be noted that such events can result in increased volatility. Most strategies applicable to trading in other markets can be used to trade forex as well, including technical and fundamental analysis. You can also develop your forex trading strategies using resources like IG’s Trading Academy.

Once your strategy is developed, you can follow the above steps to opening an account and getting started trading forex.

Your profit or loss is calculated according to your full position size. Leverage will magnify both your profits and losses. It’s important to manage your risks carefully as losses can exceed your deposit. Ensure you understand the risks and benefits associated with trading leveraged products before you start trading with them. Trade using money you’re comfortable losing.