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MONETARY POLICIES by Jarratt Davis


FX


FOMC and Bank of Japan Divergence Confirmed


Towards the end of September, we saw both the FOMC and Bank of Japan hold meetings. As most Forex traders know, these meetings are important, as they can provide insights into potential shifts in monetary policy. The purpose of this article is to analyse the key points from each meeting, while exploring the potential impact on respective currencies.


FOMC Meeting


Let’s start with the FOMC meeting which was held on the 19th and 20th September.


Remember, for the best part of 2017, the market has been anticipating another interest rate hike in December. However, in the months


prior to this meeting, traders and investors have had one eye on US inflation - which continues to undershoot the Federal Reserve’s 2% target. This has led some to speculate that the hiking cycle could be slowed.


However, data from the September meeting


suggests that it is still


likely that another interest rate hike will happen in December. US job creation remains remarkably consistent - and less emphasis is now being placed on the


labor


participation rate, which is low in historical terms.


But while it’s likely that we’ll see another rate hike in December, there


FX TRADER MAGAZINE October - December 2017 9


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