The governor’s press conference which follows the publication of the monetary policy decisions taken by the Governing Council of the European Central Bank (ECB) is one of the most eagerly awaited moments for forex traders, as it is the occasion in which the bank discloses information to such an extent and for such an importance that it has no equal in the trading calendar.
The governor’s press conference usually starts about an hour after the publication of the official statement containing the monetary policy decisions (13.45 CET). Traders come to this appointment already aware of what the Council has decided, in particular the setting of the main interest rates and, in recent times, the size of the asset purchase programmes, also known as “quantitative easing”. Immediately after the publication of the official statement there is usually a high volatility on the forex market, depending on what has been decided.
At the press conference, therefore, one always comes to a situation where the markets are already in turmoil, and traders are often closing their long or short positions after reading the Board’s decisions. The press conference can either simply confirm what is already written in the official statement, or it can add important details that did not appear in the statement, especially in relation to the size of the measures taken, the timing and forward guidance. From this point of view, each press conference is different.
After the introductory statement read by the governor, the phase of questions from journalists opens, which may concern both the Board meeting and issues of more general interest concerning the ECB. Often, the questions concern the impact of monetary policy decisions on the economies of member countries or the relationship with decisions taken by other central banks. Normally, the governor tends to answer these questions in a “diplomatic” fashion, i.e. using tones and arguments that are not too strong, often avoiding even to answer questions, with the intention of not causing major market turbolences. However, in some other cases, either because of the need to emphasize a position in a clear-cut way, or because of a possible communication error, the governor may declare something unexpected that moves the market a lot. It is therefore appropriate for a trader to always follow the whole press conference carefully and immediately understand which sentences may provoke market reactions, and immediately opening or closing his trading positions according to their importance. In these situations, the timeliness of entering the market is a fundamental factor to obtain maximum profitability from the operation.
In order to understand what decisions impact on the market, a trader certainly needs to have some experience and constantly follow ECB issues, so as to understand what the expectations of traders are and whether or not they are met.