What is decided
The main decision is the policy interest rate: for the Fed, the target range for the federal funds rate; for the ECB, its key interest rates. Central banks raise rates to cool inflation and lower them to support growth and employment.
The decision comes with words: a statement and a press conference that explain the reasoning and hint at what may come next. Markets read this guidance as closely as the decision itself.
Why currencies react
Interest rates influence where money flows. When the Fed is expected to keep U.S. rates higher for longer than the ECB keeps euro rates, that has more often supported the U.S. dollar against the euro, and the other way round.
Most decisions are expected: futures markets price the likely outcome in advance. The market therefore reacts mainly to what was not expected — a different decision, a change in tone, or new projections.
How decisions differ from data releases
A data release has one Actual number to compare with a Forecast. A decision has no single number that tells the whole story: the statement, the projections and the press conference can each move the market, sometimes in opposite directions within the same hour.
Volatility is not direction. Around a decision, spreads can widen and prices can jump both ways before a direction settles — or never settles at all.
How NEXTMarketReaction treats central bank decisions
The economic calendar shows Fed and ECB decisions with their time, so you know when volatility is likely. They are marked as volatility events: NEXTMarketReaction does not produce an UP or DOWN direction for them.
Data releases such as CPI, NFP and Jobless Claims feed the market's rate expectations between meetings — that is where our release analysis applies.
A simple example
Hypothetical: markets fully expect the Fed to keep rates unchanged, and it does. In the press conference, however, the Chair suggests that cuts could come sooner than markets assumed.
The decision itself was no surprise, yet the dollar can weaken because expectations for future rates fell. The lesson: with central banks, the surprise is often in the guidance, not in the decision.