The Pound and Euro Fall as Dovish Fed Tone Fails to Weaken the Dollar

European currencies came under pressure after the latest Federal Reserve meeting. Despite a 0.25% rate cut, the US dollar held firm, as Fed Chair Jerome Powell’s comments stopped short of signalling the start of a sustained easing cycle. Markets had seemingly expected stronger hints of further cuts; however, Powell emphasised that future decisions would depend on incoming data and the broader economic outlook.

Investor disappointment deepened after the Fed acknowledged uncertainty in assessing inflation prospects and the effects of the partial US government shutdown on data collection. This prompted traders to adjust expectations: while the probability of another rate cut in December now stands at nearly 95%, there is little consensus on the pace of future policy easing.

Against this backdrop, both the euro and pound slipped against the dollar, reflecting stronger US assets and rising Treasury yields. The single currency also remains under pressure ahead of the upcoming European Central Bank meeting, where markets are hoping for clearer guidance on the future direction of monetary policy.

Investors remain cautious before the release of key eurozone data on inflation, GDP, and business activity. Until then, EUR/USD remains under pressure, while GBP/USD is hovering near local lows.

EUR/USD

The EUR/USD pair continues to trade sideways within the 1.1580–1.1670 range. Sellers attempted to break below support at the lower boundary yesterday, but without success. Technical analysis suggests a potential rebound towards 1.1670–1.1700 if the price consolidates above 1.1600. However, a decisive break below 1.1580 could trigger a retest of the October low near 1.1540.

Key upcoming events likely to influence EUR/USD:

• 12:00 (GMT+3): Germany GDP
• 13:00 (GMT+3): Eurozone expected consumer inflation
• 16:15 (GMT+3): ECB interest rate decision

GBP/USD

Investor uncertainty following yesterday’s Fed decision pushed the GBP/USD pair to test the August lows of the current year around 1.3140 — levels not seen since May 2025. A confirmed move below 1.3140 could accelerate the downtrend, while the nearest area for a potential rebound lies between 1.3280 and 1.3300.

Upcoming events that could affect GBP/USD pricing:

• 15:30 (GMT+3): US GDP
• 16:55 (GMT+3): Speech by FOMC member Michelle Bowman
• 10:00 (GMT+3) tomorrow: UK Nationwide House Price Index

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