The following report shows what were the cumulative returns of the US Trade weighted index 21 days prior and following the FOMC meetings. The green line is the average of the sample. It also shows how the delivered volatility of the US TWI prior and after the Fed annoucements. I have split my analysis to show the market reaction as for when when there was not change in the Fed Funds target rate, when a cut in the rate occured and when there was hike.
From 1990-02-07 to 2015-10-28 there was 261 Fed meetings.Out of those 31 meetings translated in an increase in the target rate and 32 in a cut. The below charts shows when those took place and also the distribution fo the changes in the Fed’s target rate.
The charts below show the US TWI response for all of the Fed’s meetings and the delivered volatility 21 days prior and after the meetings. The green line shows the
average response to teh even.
The charts below show the US TWI response and delivered volatility for all of meetings where a cut occured
The charts below show the US TWI response and delivered volatility for all of meetings where a hike occured
The charts below show the US TWI response an delivered volatility for all of meetings where there was no change in the Target rate.
There does not seem to be any clear pattern in the way the US TWI trade or its volatility prior or after the Fed’s annoucements….contrarily to what is observed for the S&P 500