BREAKING: Fed Poised to Slash Rates Again as Labor Market Jitters Intensify
Markets brace for monetary easing as employment indicators flash warning signs.
THE PRESSURE BUILDS
Jerome Powell's crew appears ready to fire up the printing presses—again. Labor data's looking shaky, and Wall Street's betting the central bank will blink first. Traders are pricing in cuts before year-end, with futures markets signaling at least two reductions by December.
GOLDMAN'S TAKE
The big banks are revising forecasts faster than you can say 'quantitative easing.' Goldman Sachs now projects a 50-basis-point cut by Q4, while JPMorgan warns of 'persistent weakness' in hiring numbers. Street consensus says the Fed's backed into a corner—inflation be damned.
CRYPTO CONNECTIONS
Digital assets typically rally when dollar liquidity expands. Bitcoin's already sniffing out the stimulus, up 15% since labor data dropped. History shows crypto outperforms during easing cycles—2019 saw 300% gains post-cut. This time? Might be even juicier.
THE CYNICAL KICKER
Because nothing says 'healthy economy' like emergency rate cuts while unemployment claims supposedly sit at 'historic lows.' Guess some data points are more equal than others when Wall Street needs its fix of cheap money.
When will the Fed announce its interest rate decision and how could it affect EUR/USD?
The Fed is scheduled to announce its interest rate decision and publish the monetary policy statement, alongside the revised SEP, at 18:00 GMT. This will be followed by Fed Chair Jerome Powell’s press conference starting at 18:30 GMT.
There are several different scenarios to consider that could influence the US Dollar’s (USD) valuation in a significant way.
In case the Fed surprises markets with a 50 bps rate cut, the USD could come under heavy selling pressure with the immediate reaction. However, the USD could rebound right away if the reasoning behind such a decision suggests that the Fed wants to frontload the rate cut to buy time to analyze more inflation and employment data before taking another policy step. That, basically, WOULD sharply decrease the chances of subsequent rate cuts.
In a different scenario, the Fed could go for a 25 bps cut as expected, but the USD could still weaken if the dot plot points to a dovish shift in the policy outlook, highlighting multiple rate cut projections next year.
Conversely, the USD could gather strength if the SEP shows only one or two rate cuts are forecast by Fed officials next year.
Market participants will also pay close attention to comments from Chair Powell in the post-meeting press conference. A concerned tone about the labor market outlook and growth prospects could be bearish for the USD, while a reiteration of inflation risks could support the currency.
Deutsche Bank analysts think that the median dot of the updated SEP will likely show 75 bps of total reductions for 2025, 25 bps more than in June.
“However, there is likely to be differing views within the committee. On the dovish side, there could be three calling for a 50bp cut and possibly one or two voting for no change. It has the potential to be the first meeting where three governors dissent since 1988, and the first with dissents on both sides since September 2019,” they add.
Eren Sengezer, European Session Lead Analyst at FXStreet, provides a short-term technical outlook for EUR/USD:
“EUR/USD clings to a slightly bullish stance in the near term. The Relative Strength Index (RSI) indicator on the daily chart holds above 50 as the pair trades above the 20-day and the 50-day Simple Moving Averages (SMAs).
On the upside, the first resistance level is located at 1.1830 (July 1 high) before EUR/USD could test 1.1900 (static level, round level) and 1.2000 (round level). Looking south, 1.1680-1.1660 (20-day SMA, 50-day SMA) aligns as a support region before 1.1540 (100-day SMA).”
