How do speeches and conferences affect the forex market

Speeches and conferences in Forex that influence markets are those held regularly in events where they talk about the state of the economy.

This includes Speeches from;

1. The presidents,
2. Governors of central banks
3. The representative members in the overall governing body of a central bank.
4. The Fed FOMC meetings

The Fed FOMC speeches and conferences in forex influence the markets highly and are normally critically observed by traders.

The Federal Open Market Committee (FOMC)

The Federal Open Market Committee is the monetary policy arm of the Federal Reserve( Central bank) of the United States. 

It works with the Federal Reserve( Central bank) to Execute the monetary policy.

FOMC holds 8 regularly scheduled meetings during the year and other meetings as needed.

The minutes of the meetings are released three weeks after the date of the policy decision. The minutes contain the summary of economic  projections and  press conference by the chair.

FOMC executes monetary policy for the Federal Reserve System of the United States and reviews economic conditions.

It is responsible for the formulation of policies to promote stable prices and economic growth.

Through these meetings the Fed FOMC decides on whether to use the expansionary monetary policy or contractionary policy.

FOMC economy effect  – speeches and conferences in forex

FOMC, is the Fed’s monetary policy making body.

This simply means, FOMC manages the nation’s money supply.

It uses expansionary monetary policy to boost economic growth and contraction policy to curb down inflation

When FOMC executes expansionary monetary policy

In the periods of low economic growth and high unemployment rate, FOMC cuts interest rates to increase the money supply in the economy. 

This makes borrowing cheap and spending.

As demand increases, investment will also increase as well as production. It also results to more demand for employees hence increase in wages.

This results to economic growth and currency appreciation.

When FOMC executes contractionary monetary policy

When the inflation indicators such as CPI and PPI all point to high inflation in the economy, the Fed will increase interest rate. 

This makes borrowing and spending expensive. As a result people will prefer to save to earn more from interest hence less spending.

Currency is also expected to appreciate on high interest rate

At the release of FOMC minutes , investors are able to gauge how the economy will be.

In case of a raise of interest rate,

Expect a slow growth in the economy. In addition, loans become expensive  but the currency appreciates.

On the other hand, if Fed cuts interest rates,

It encourages fast economic growth. This due to cheap borrowing and increase in  expenditure/demand.  However, this may lead to fall in currency value.

The same happens when very important people in the country or regulatory bodies especially from the Central Bank give speeches.

For example speeches from the Heads of states and Central bank’s chair persons. These speeches are likely to affect the country both economically and politically.