2022-11-02 12:38:09
We got the biggest week of the month, with the main event being our beloved FOMC where daddy Powell will decide whether he wants to continue giving the market relief or shut down any rumours of a potential pivot and prolong our pain.
Wednesday 2nd November
6pm UTC - FOMC Statement + Federal Funds Rate
*What it is?*
The FOMC statement is the statement that the Fed puts out 30 mins before the press conference Powell has and it includes the outcome of what the Fed decided the interest rate to be as well as their commentary on the current economic conditions, and why they chose said interest rate based of that. A key thing to note here is to compare the change or lack of change of their stance based of their last statement.
*What to look out for?*
This requires qualitative analysis and interpretation about the type of language that the Fed uses to describe the economy and the potential hints and clues they give regarding the future monetary policy decisions they will make. It requires a very good understanding of what the current policy is and what would be considered dovish or hawkish for it based of what the Fed says.
*How does it affect crypto?*
What is most important here is essentially the interest rate the Fed decides and whether or not it is below expected, expected, or above expected.
Expected in this case being a rate hike of 75bps which you can track using prediction markets which I regularly post about here. Currently, a 75bps rate hike is being priced in at a 88.7% probability.
6:30pm UTC - FOMC Press Conference
*What it is?*
This is the regular 1 hour presser we have 30 mins after the release of the FOMC statement which has 2 parts. The first part is a prepared statement that Powell reads followed by a Q&A session which is the more important part, where Powell is asked a series of questions regarding the economy. Panelists will ask probing questions in the hope that Powell reveals details about the Fed's intentions in the future. Since these questions are unscripted and Powell can be caught off-guard, it can lead to volatile moments.
*What to look out for?*
This requires qualitative analysis and interpretation about the type of language that Powell uses in his prepared statement as well as the answers that he gives to the questions being asked. It requires a very good understanding of what the current policy is and what would be considered dovish or hawkish for it based of what Powell says. The Q&A session, is the part where traders and economists focus heavily on.
Specifically, I believe this part of the event to be very important as many traders and economists are speculating that the Fed are going to slow down the pace of rate hikes but the final terminal fund rate to be higher, i.e. from December onwards to be 50bps rate hike but the terminal rate to be higher than the 4.6% proposed so far. However, we do not get a new dot plot release until December so it will have to be gauged by the language used by Powell.
If they do make any suggestion of slowing the pace of rate rises down, I think the market will interpret this as a potential "pivot" and we should rally hard if that is the case.
*How does it affect crypto?*
The Q&A session will be the most volatile section during this event leading to a lot of whipsaws and illiquid candles if Powell gives conflicting answers. Again, it requires qualitative analysis and interpretation to figure out whether it was dovish, neutral or hawkins
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