US Dollar Edges Higher As Powell Makes Risky Gambit. Forecast as of 18.09.2025
Only one dissenting FOMC member, appointed by the US president, Stephen Miran, demonstrated the Fed’s unity and independence. This is a clear setback for the US administration, which is advocating for a weaker dollar. Let’s discuss this topic and make a trading plan for the EURUSD pair.
The article covers the following subjects:
Major Takeaways
- The Fed intends to cut rates twice more in 2025.
- In September, there was only one dissenting voice in the FOMC.
- Jerome Powell’s rhetoric strengthened the US dollar.
- The EURUSD pair can be bought on a rebound from 1.1745 or a return above 1.1825.
Weekly US Dollar Fundamental Forecast
The US dollar has won the battle, but it will surely lose the war, because an army of sheep led by a lion is stronger than an army of lions led by a sheep. Jerome Powell brilliantly united the members of the FOMC, with 11 out of 12 voting for a 25 basis point rate cut. However, he will retire in 2026. He will be replaced by Donald Trump’s appointee, likely to be someone like Stephen Miran, the only dissenter in September. This means that the EURUSD bulls will definitely make a comeback.
In a chess gambit, a player sacrifices a pawn to gain a winning position. Jerome Powell has done this three times during his tenure as Fed chair. He made a preventive rate cut to bring the US economy to a soft landing. His efforts in 2019 were interrupted by the pandemic. In 2024, he succeeded—the labor market stabilized against the backdrop of three acts of monetary expansion from September to December by 100 basis points. Here comes the third attempt.
Against this news, the EURUSD pair showed a strong reaction. The major currency pair soared above 1.19 after the publication of the FOMC’s revised rate forecast. Officials see two more cuts in 2025, which is fully in line with market expectations. Before the meeting, the derivatives market indicated a 70% probability of such an outcome. After the meeting, the odds rose above 90%.
Market Expectations for Fed Rate Cuts
Source: Wall Street Journal.
As a result, the age-old principle of “buy the rumor, sell the news” came into play. Profit-taking on long trades in the EURUSD pair has pushed prices down. The decline in the main currency pair was accelerated by the fact that only one dissenting vote was cast in favor of a 50 bp rate cut instead of the expected three, as well as Jerome Powell’s rhetoric.
The Fed chairman said that the central bank was shifting its focus from inflation to the labor market amid the latter’s cooling. The US regulator considers the accelerating inflation due to tariffs to be temporary. However, there were also some fresh statements. Jerome Powell said that the current rate cut could be seen as a reduction in risk management. The high cost of borrowing is a hedge against inflation. The reduction of this hedge indicates that the process will be gradual.
FOMC Members’ Dot Projections
Source: Bloomberg.
Furthermore, the FOMC split exerted downward pressure on the EURUSD pair. Seven members see no cuts in 2025, while two members predict only one. Moreover, the Fed may halt its easing cycle earlier. Notably, the market predicts that the Fed will reduce the rate to 3%. Should the Fed put the brakes on rate cuts earlier, the US dollar will strengthen.
Weekly EURUSD Trading Plan
The US dollar’s victory is Donald Trump’s defeat. However, it is quite possible that Christopher Waller and Michelle Bowman joined the majority in order not to lose their authority. The example of Stephen Miran shows what will happen when there are more people from the US president’s camp on the FOMC. The federal funds rate will fall, and the EURUSD pair will rise. Meanwhile, the current pullback is a great opportunity to buy the pair if the euro returns above 1.1825 or rebounds from 1.1745.
This forecast is based on the analysis of fundamental factors, including official statements from financial institutions and regulators, various geopolitical and economic developments, and statistical data. Historical market data are also considered.
Price chart of EURUSD in real time mode
The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteFinance broker. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2014/65/EU.
According to copyright law, this article is considered intellectual property, which includes a prohibition on copying and distributing it without consent.
