🇺🇸 Federal Reserve Rate Cut — Forex Market Impact (29 Oct 2025)

Decision: The Fed cut the federal funds rate by 0.25 %, bringing it to 3.75 %–4.00 %, marking the second consecutive rate cut of 2025.

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1. USD Weakening Bias

Lower interest rates reduce dollar-denominated yields, making the USD less attractive to global investors. Expect medium-term USD softness against G10 currencies, especially EUR, GBP, and JPY.

2. EUR/USD Outlook

The euro may strengthen modestly as the Fed’s easing contrasts with the ECB’s cautious tone. However, upside could be capped if European growth remains weak. EUR/USD 1.12–1.14 range looks feasible short-term.

3. GBP/USD Volatility

Sterling could rally on dollar weakness, but BoE policy divergence may limit gains. Watch London session liquidityfor high-vol spikes.

4. USD/JPY Rebound Risk

A weaker USD usually pushes USD/JPY lower, but if yields rebound after the Fed’s cautious comments, yen strength may fade. Keep an eye on 10-year Treasury yields.

5. Commodity Currencies Rise

AUD, NZD, and CAD may benefit from dollar softness and improved global liquidity. However, oil-price swings and Chinese data will shape CAD and AUD directions.

6. Gold and Silver Upside

Precious metals typically gain as real yields fall. A sustained gold rally above $2,550/oz could signal broader inflation-hedging flows.

7. Inflation Still a Risk

The Fed is prioritising growth over inflation control. If inflation re-accelerates, the USD may rebound sharply later — don’t assume one-way weakness.

8. Short-Term Liquidity Boost

Lower rates improve interbank liquidity and credit flow, meaning more active intraday trading conditions across majors and indices.

9. Fed Guidance Still Hawkish

Jerome Powell emphasised that further cuts are “not guaranteed”. The tone prevents runaway dollar selling — keep stops tight around key technical levels.

10. Risk Sentiment Lift

Equities may gain, supporting risk-on pairs like AUD/JPY, NZD/JPY, and GBP/JPY. Watch for risk-off reversalsafter initial rallies.

11. Treasury Yields Mixed

While short-term yields fell, long-term yields rose slightly — a classic curve-steepening move that can stabilise USD short-term.

12. Government Shutdown Distortion

With key data delayed, markets may overreact to incomplete information. Avoid over-leveraging ahead of uncertain data releases.

13. QT Program Ending

The Fed ending its balance-sheet runoff (QT) by December 1 means liquidity conditions improve — bullish for equities and short-term dollar selling.

14. Technical Strategy Implications

Use this macro shift to refine setups:

• Align Ichimoku Cloud trends with macro tone.

• Seek order-block re-tests near USD resistance zones.

• Expect false breakouts around news-driven volatility.

15. Strategic Lesson for Traders

The market anticipates central banks — not reacts to them. The best traders price in expectations early and trade reactions only with confirmed direction + volume support.

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💼 Chestnut Field Trading Limited — Trader Note

This decision reinforces our macro theme for Q4 2025:

“The transition from tightening to neutral liquidity — with USD volatility driven by labour data and inflation surprises.”

Core view:

• USD bias → slightly bearish short term

• Gold bias → bullish

• Risk assets → supported, but sensitive to data gaps