Crypto & Forex October 29, 2025 0 Comments

Is the Fed’s Surprise Rate Cut Signal the Start of a Market Shake-Up You Can’t Afford to Ignore?

Alright, here we go — the spotlight’s back on the U.S. Federal Reserve as it gears up to drop its October interest rate decision. Everyone’s buzzing (and by everyone, I mean the market participants and those numbers-crunching economists) about a 25 basis point cut, nudging rates down to a cozy 3.75%-4%. But here’s the kicker — the Fed’s playbook looks like it’s got a few more cuts tucked away through 2027. So, are we witnessing the slow dance toward easier money, or is this just the calm before the storm? Thing is, this Fed meeting isn’t your run-of-the-mill policy shuffle. We’re talking about a backdrop thrown into chaos by a federal government shutdown, stalling key economic data the Fed usually depends on — think employment numbers and jobless claims. Plus, delayed CPI figures that came in softer than expected add another twist to this financial soap opera. Fed Chair Powell’s hinting that the era of quantitative tightening might be wrapping up, signaling the possible end of shrinking the Fed’s bond holdings. It’s a high-wire act balancing inflation fears, labor market signals, and unprecedented uncertainty. And what does this all mean for the mighty dollar and the EUR/USD dance? Will Powell’s words send ripples across the FX waters or just ripple gently? Buckle up — this October meeting promises to be anything but dull. LEARN MORE

The United States (US) Federal Reserve (Fed) will announce its interest rate decision and publish the Monetary Policy Statement following the October policy meeting on Wednesday.

Market participants widely anticipate the US central bank to cut the policy rate by 25 basis points (bps), lowering it to the range of 3.75%-4%.

The CME FedWatch Tool shows that investors are fully pricing in the 25 bps reduction in October and see about a 95% probability of one more 25 bps cut at the last policy meeting of the year in December.

The revised Summary of Economic Projections (SEP), published in September by the Fed, showed that policymakers’ projections implied two more 25 bps cuts in 2025, followed by 25 bps reductions in both 2026 and 2027.

According to a recently-conducted Reuters poll, 115 of 117 economists have predicted that the Fed will opt for a 25 bps cut in October, while 83 of them saw one more 25 bps cut in December. Moreover, 25 of 33 economists noted that the bigger risk to the Fed rate policy by the end of this cycle is that it would set rates too low.

The Fed’s meeting will take place under unusual circumstances. The federal government entered a shutdown on October 1 after Congress failed to pass new funding legislation. As a result, several key macroeconomic data releases that the Fed assesses when setting its monetary policy have been suspended, including the monthly September employment report and multiple weekly Initial Jobless Claims data. The Consumer Price Index (CPI) data for September, originally scheduled to be published on October 15, was released with a delay on October 24. The report showed that the CPI and the core CPI rose by 0.3% and 0.2%, respectively. Both of these prints came in softer than analysts’ estimates.

TD Securities analysts agree that the US central bank will likely continue recalibrating policy closer to neutral, implementing another 25 bps cut. “Despite mounting uncertainty amid the lack of data releases, we still expect the Committee’s guidance to tilt dovish. Chair Powell will likely continue walking a fine line when flagging signs of labor market weakness. The risk of persistent inflation remains a risk,” they add.

Fed Chair Powell recently indicated that they could be nearing the end of the quantitative tightening (QT) and stop reducing the size of the central bank’s bond holdings. The Fed could either officially announce that it will stop the balance sheet runoff or provide a future date. Deutsche Bank analysts argue Fed Chair Powell will focus on the balance sheet policy and the policy framework review in the press conference. “On QT, our team expects the Fed to announce an end to the programme today, with the run-off concluding next month,” they note.

When will the Fed announce its interest rate decision and how could it affect EUR/USD?

The Fed is scheduled to announce its interest rate decision and publish the Monetary Policy Statement at 18:00 GMT. This will be followed by Fed Chair Jerome Powell’s press conference starting at 18:30 GMT.

The rate decision itself is unlikely to trigger a significant market reaction. Moreover, it shouldn’t be a surprise to see policymaker Stephen Miran dissent with a vote for a 50 bps cut.

Since a December rate cut is largely priced in, the US Dollar (USD) could gather strength if the policy statement, or Fed Chair Powell, adopts a cautious tone on further policy easing, citing the uncertainty created by the lack of economic data. Additionally, any comments suggesting heightened upside inflation risks, while economic activity remains healthy, could have a similar effect on the USD’s performance and drag EUR/USD lower.

Conversely, the USD could come under pressure if Powell notes that the government shutdown could further hurt the labor market and cause the central bank to put more weight on the employment side of its mandate. Also, an optimistic tone on the inflation outlook could be seen as dovish and intensify the USD weakness, opening the door for a leg higher in EUR/USD.

Societe Generale analysts note that the US’ Gross Domestic Product (GDP) growth was well above potential, at least until the third quarter, and inflation continued to rise. “There are justified concerns about a weakening labour market and the potential damage from high and rising uncertainty. The thick fog left by the absence of data ought to tilt the balance towards something of an “insurance” cut. That said, the decision is again likely to not be unanimous,” they explain.

Eren Sengezer, European Session Lead Analyst at FXStreet, provides a short-term technical outlook for EUR/USD:

“EUR/USD manages to hold slightly above the lower limit of an ascending regression channel coming from January, and the Relative Strength Index (RSI) indicator on the daily chart stays near 50, suggesting that the bullish bias remains intact but lacks strength.”

“The 100-day Simple Moving Average (SMA), the 50-day SMA and the 20-day SMA converge in the 1.1650-1.1700 area, offering initial resistance to the pair. A decisive move above this region could attract technical buyers. In this scenario, 1.1920 (September 17 high) could be seen as the next resistance level before 1.2000 (mid-point of the ascending channel, round level). Looking south, the first support could be spotted at 1.1600 (lower limit of the ascending channel). A daily close below this level could open the door for an extended slide toward the 200-day SMA, currently located near 1.1300.”

US Dollar FAQs

The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022.
Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.

The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates.
When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.

In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system.
It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.

Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.