How the Fed’s decision impacts major currency pairs
The Federal Open Market Committee (FOMC) meeting outcome has sent shockwaves through the forex trading markets, affecting AUD/USD, EUR/USD, GBP/USD, and USD/JPY pairs.
The immediate market reaction saw the US dollar strengthen across the board, with the forex market responding sharply to the Federal Reserve’s (Fed) more restrictive stance regarding 2025 and beyond. Major currency pairs experienced heightened volatility, with AUD/USD, EUR/USD and GBP/USD declining while USD/JPY pushed higher, demonstrating the significant impact of the Fed’s hawkish tone.
Forex trading platforms saw increased activity as traders adjusted their positions in response to the changing monetary policy landscape.
Understanding the Fed’s rate decision
The FOMC delivered its anticipated 25 basis point (bp) cut, bringing the Federal Reserve Funds interest rate to a range of 4.25% to 4.50%. Notably, the Fed signalled a slower pace of easing in 2025, projecting just two 25 basis point cuts compared to the four previously forecast. The revised projections proved more hawkish than most market participants had anticipated, particularly impacted major currency pairs, with traders reassessing their positions across AUD/USD, EUR/USD, GBP/USD, and USD/JPY.
US dollar strength and cross-currency implications
The dollar’s surge has created significant pressure on major currency pairs, with AUD/USD slipping to 2 ¼ year lows and fast approaching the October 2022 low at $0.6171. If it were to give way, the October 2008 low at $0.6009 would represent the next downside target.
AUD/USD monthly chart
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