I have noticed that usually on Fed day there is what I call the "FOMC Two-Step."
Leading into the announcement, the market goes sideways. Just before the announcement, there is a head-fake consisting of a break one way or the other, and lasting only about 5 minutes or so. Then comes the real move, which is much more pronounced, in the opposite direction, and lasts at least an hour. The real move usually comes just a few minutes before the actual announcement, sometime right at the announcement.
So, whichever way the market breaks initially (usually around 1:45pm or so), the real move is the opposite way, often 1% or more.
The market (as reflected in the Fed Funds futures contracts) has fully priced in a 25bp hike tomorrow, by the way. This from Briefing.com:
The funds futures market reflects those market expectations with a 25 bp hike fully priced in for Wednesday. The July contract currently argues for a pause given the no-go 40% probability for a June 29 hike at the FOMC meeting. However, the August contract currently prices in 92% probability for a return to a 25 bp hike to a 5.25% policy rate at the August 8 policy meeting. The extended contracts are quite volatile and will respond to the policy statement, Fedspeak and the key economic data.
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