How the Fed’s decision impacts major currency pairs

​The Federal Open Market Committee (FOMC) meeting outcome has sent shockwaves through the forex trading markets, affecting AUD/USD, EUR/USD, GBP/USD, and USD/JPY pairs.

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​The immediate market reaction saw the US dollar strengthen across the board, with the forex market responding sharply to the Federal Reserve’s (Fed) more restrictive stance regarding 2025 and beyond.

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​Major currency pairs experienced heightened volatility, with AUD/USD, EUR/USD and GBP/USD declining while USD/JPY pushed higher, demonstrating the significant impact of the Fed’s hawkish tone.

​Forex trading platforms saw increased activity as traders adjusted their positions in response to the changing monetary policy landscape.

Understanding the Fed’s rate decision

​The FOMC delivered its anticipated 25 basis point cut, bringing the Federal Reserve Funds interest rate to a range of 4.25%-to-4.50%.

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​Notably, the Fed signalled a slower pace of easing in 2025, projecting just two 25 basis point cuts compared to the four previously forecast.

​The revised projections proved more hawkish than most market participants had anticipated, particularly impacted major currency pairs, with traders reassessing their positions across AUD/USD, EUR/USD, GBP/USD, and USD/JPY.

US dollar strength and cross-currency implications

​The dollar’s surge has created significant pressure on major currency pairs, with AUD/USD slipping to 2 ¼ year lows and fast approaching the October 2022 low at $0.6171. If it were to give way, the October 2008 low at $0.6009 would represent the next downside target.

​AUD/USD monthly candlestick chart