The U.S. dollar responded with growth, while risk assets such as the euro and pound declined. Following yesterday's meeting, Federal Reserve officials stated they expect two interest rate cuts in 2025, although new projections revealed growing disagreement among policymakers over the trajectory of borrowing costs as tariff policies continue to affect the U.S. economy. President Donald Trump expressed disappointment, calling Powell a "dummy" who is wasting billions of American dollars.
Yesterday, the Federal Open Market Committee unanimously voted to keep the federal funds rate in the 4.25%–4.5% range. It also released updated economic forecasts—the first since President Trump introduced trade tariffs in April—indicating expectations of weaker economic growth, higher inflation, and rising unemployment this year.
Speaking to reporters after the decision, Chair Jerome Powell reiterated his view that the central bank "has the ability to wait and learn more about the likely path of the economy before considering any adjustments to our policy stance."
The interest rate projections released with the decision revealed a divide: seven officials now do not foresee any rate cuts this year compared to four in March, while two anticipate one cut. Meanwhile, ten officials believe it would be appropriate to cut rates at least twice before the end of 2025. Ahead of this month's meeting, many officials had indicated a preference to keep rates unchanged for some time, waiting for clarity on how Trump's economic policies will influence inflation and the broader economy. Now, this is further complicated by the tense geopolitical situation in the Middle East.
In their post-meeting statement, policymakers dropped the previous language suggesting that risks of both higher unemployment and inflation had increased. They also said uncertainty about the economic outlook had decreased but remained elevated.
Fed officials and economists generally expect that the administration's use of tariffs will put pressure on economic activity and contribute to upward price pressures. The officials' rate forecast was in line with economists' expectations for cuts this year before the announcement. When asked about the divergence in rate projections, Powell downplayed it. Given the high level of uncertainty in the economy, he said: "No one is committed to a specific path on this issue."
U.S. Treasury bonds closed the session virtually unchanged, with yields off session lows, and traders continue to expect two rate cuts this year—the first likely to come in September.
In their updated economic projections, officials raised their median inflation estimate for the end of 2025 from 2.7% to 3%. They cut their 2025 growth forecast from 1.7% to 1.4%. Policymakers also now expect the unemployment rate to reach 4.5% by year-end, slightly higher than their previous estimate.
Technical Outlook for EUR/USD
At present, buyers need to reclaim the 1.1485 level. Only this would allow for a test of 1.1530. From there, a move to 1.1580 could be possible, but accomplishing this without support from large players would be quite difficult. The most ambitious target would be the 1.1630 high. In case of a decline, I expect major buyers to show interest around the 1.1445 level. If no one shows up there, it would be reasonable to wait for a new low at 1.1410 or consider opening long positions from 1.1370.
Technical Outlook for GBP/USD
Pound buyers need to break through the nearest resistance at 1.3425. Only this would open the way to target 1.3445, although breaking above that will be rather challenging. The most distant target is the 1.3475 level. In case the pair declines, bears will try to regain control of 1.3385. If successful, a break of this range will deal a significant blow to the bulls' positions and push GBP/USD down to the 1.3360 low with the potential to reach 1.3335.
