The U.S. dollar strengthened following news that the Federal Reserve had cut interest rates by only a quarter of a percentage point — just as expected. Shortly after the announcement, Donald Trump stated that he wanted further rate cuts to support the wavering U.S. economy.
During his speech, Fed Chair Jerome Powell noted that both unemployment and inflation are rising amid an escalating trade war, while the government shutdown has distorted official data, which was already surrounded by concerns of politicization. Therefore, according to Powell, another rate cut next month should not be expected.
Markets reacted immediately — and the response was mixed. On one hand, stabilizing interest rates, even at the current level, signals that the Fed sees no reason to panic about the state of the U.S. economy. On the other hand, the refusal to cut rates further leaves the economy and labor market vulnerable to external shocks — especially given the persistent trade disputes.
Powell's remarks appeared aimed at tempering expectations in financial markets, where the probability of another quarter-point rate cut in December had confidently exceeded 90% prior to his speech. "A further reduction in the key rate at the December meeting is not a foregone conclusion," Powell said.
The Federal Open Market Committee voted 10–2 to lower the target range for the federal funds rate by 0.25 percentage points to 3.75%–4.00%. The Fed also announced that it would end the reduction of its asset portfolio on December 1, concluding a process that began in 2022. Since then, the Fed has shed more than $2 trillion in Treasury and mortgage-backed securities, reducing its balance sheet to below $6.6 trillion — the lowest level since 2020.
In its post-meeting statement on Wednesday, Fed policymakers reiterated their assessment that job growth has slowed and said that employment risks have increased in recent months. Officials also described economic growth as moderate and noted that inflation has risen since the start of the year and remains somewhat elevated.
As noted above, all this led to a strengthening of the U.S. dollar and a decline in risk assets in the currency market.
Technical Outlook for EUR/USD
At present, buyers need to focus on breaking above 1.1645. Only this move would open the way toward testing 1.1668. From there, the pair could climb to 1.1696, though doing so without support from large market participants may prove difficult. The most distant upward target is 1.1725. If the instrument declines toward 1.1621, I expect major buyers to take action there. If no one steps in, it would be wise to wait for a retest of the 1.1602 low or consider opening long positions from 1.1580.
Technical Outlook for GBP/USD
Pound buyers need to overcome the nearest resistance at 1.3240. Only then will they be able to target 1.3270, above which further gains will be quite difficult. The most distant upward target lies in the 1.3310 level. In case of a decline, the bears will try to regain control over 1.3190. If they succeed, a breakout below this range would deal a serious blow to the bulls' positions and push GBP/USD down to 1.3170, with the potential to extend toward 1.3140.
