Maybe for new traders, the terms FED, FOMC and NFP are often heard, right? But still do not understand and do not know what the difference is.
And all three of these will be very closely related to the US dollar currency.
Make sure that after reading this article, you can differentiate between the three terms.
FED
The Federal Reserve or often abbreviated as ‘Fed’ or ‘The Fed’ is the central bank of the United States (US) and is said to be the most powerful financial institution in the world.
Like the functions of other central banks, the Fed has a role to play in controlling the balance of the US economy by implementing appropriate monetary policy according to current economic conditions.
There are traders who are dizzy because there are so many Feds. There's the New York Fed, there's the Boston Fed, the Chicago Fed, so which one do you want to see?
The Fed actually has 12 branches in different provinces and the main Federal Reserve is located in Washington D.C. be the backbone for any monetary policy decision currently led by, Chairman Jerome Powell.
FOMC
To determine monetary policy whether to raise or lower interest rates, tighten or relax policies, the Fed will meet 8 times a year and decisions will be decided by members of the Federal Open Market Committee (FOMC).
The FOMC members will consist of 12 people, namely 7 members of the Board of Governors, the President of the New York Fed and the remaining 4 are the President of the Fed from other branches who will take turns.
What is it that is often referred to as a ‘hawkish and dovish’ tone in every commentary on the results of a central bank meeting?
Hawkish refers to central bank decisions that tend toward policy tightening. For example, central bank governors announced higher interest rates. This situation will usually push the value of the country's currency to increase.
Dovish, on the other hand, was referring to the central bank's more passive decision to either maintain policy or further relax policy. For example, interest rates are maintained, or the general central bank to increase the money supply into the economy. This will push the value of the country’s currency to depreciate.
NFP
When the Fed meets to determine monetary policy changes, what will the Fed see? Based on what?
The Fed will assess the economy based on published data. Usually the data that will be the focus of the central bank is inflation rate (CPI), economic growth (GDP) and employment data.
Non-farm payroll or NFP is a reading of employment increase data in the United States (excluding plantations) into focus published every Friday of the first week at the beginning of the month.
Usually changes in NFP data figures will have a major impact on price movements in the market especially to the US dollar.
