Fed Cuts Interest Rates by 0.5%

FXOpen

As we have frequently noted, a rate cut by the Federal Reserve seemed inevitable. Market participants debated whether the reduction would be 0.5% or 0.25%, and those predicting a 0.5% cut were proven correct.

According to Bloomberg, a narrow majority of 10 out of 19 committee members supported the 50-basis-point cut. Seven members favoured an additional 0.25% cut later this year, while two opposed any further reductions.

Fed Chair Jerome Powell stated that the 0.5% cut "reflects our growing confidence that we can maintain labour market strength amid moderate growth and a steady decline in inflation to 2%". He added that interest rates are unlikely to return to the ultra-low levels seen for many years before the pandemic.

Financial markets reacted with increased volatility, with stock indices rising and the dollar strengthening slightly against other currencies. However, it is still too early to determine the impact of the Fed's decision on current trends.

Technical analysis of the EUR/USD chart shows that:

→ The ATR indicator reveals that the Fed's decision led to a volatility spike, though it was smaller than the panic-induced drop in the Japanese stock market on 5 August. It seems the markets were better prepared for yesterday’s news.

→ Following the announcement, the price approached the late August high near the psychological level of 1.120 but did not exceed it. The volatility spike also tested the 13 September low around 1.107.

→ As of this morning, the EUR/USD rate is near the median line of the blue uptrend channel, constructed using linear regression, and equidistant from the extremes set during the volatility spike.

This suggests that the market is in a relatively balanced position. Market participants may need to better understand the implications of the Fed's decision. Their revised assessments, reflected in trading decisions, will provide more insight into the prevailing trends.

Trade over 50 forex markets 24 hours a day with FXOpen. Take advantage of low commissions, deep liquidity, and spreads from 0.0 pips. Open your FXOpen account now or learn more about trading forex with FXOpen.

This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.

Stay ahead of the market!

Subscribe now to our mailing list and receive the latest market news and insights delivered directly to your inbox.

Latest articles

Indices

Hang Seng Index (HSI) Drops Nearly 10% Today

As shown on the Hang Seng Index chart (Hong Kong 50 on FXOpen), prices have fallen by almost 10% since trading began today, and the session is not over yet.

According to Reuters, bearish sentiment was driven by uncertain statements

Forex Analysis

XBR/USD Analysis: Brent Crude Price Fails to Hold Above $80

As shown on the XBR/USD chart, Brent crude oil prices surged by over 8.5% last week — marking the largest increase in 2024, driven by escalating tensions in the Middle East.

Although oil prices continued to climb earlier this

Fibonacci Retracements in Action: Practical Applications for Traders
Trader’s Tools

Fibonacci Retracements in Action: Practical Applications for Traders

If you’re wondering how to trade with Fibonacci retracements, you’re in the right place. In this article, we will break down why traders use retracements, their unique features, and how you can apply them in your trading strategies.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 60% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.