The US labor market is stabilizing, while inflation risks are building. This points to a higher likelihood that the Fed will maintain a hawkish stance rather than move toward rate cuts, which will support EUR/USD bears. Let’s explore this further and outline a trading plan.
The article covers the following subjects:
Major Takeaways
- Jerome Powell will remain on the FOMC.
- Dissent among Federal Reserve policymakers has reached its highest level since 1992.
- Interest rate cuts are not always beneficial for the economy.
- Short positions on the EUR/USD pair can be considered with targets of 1.1615 and 1.156.
Weekly Fundamental Forecast for Dollar
There are doves in the FOMC, but no one hears them. Jerome Powell’s statement that rates are in the right place and that no FOMC member is currently calling for a change makes Stephen Miran feel like a non-entity. After all, he voted in favor of easing monetary policy. However, no matter how hard the US president’s appointee tried, he was ignored and shown the door. The same may well happen to Kevin Warsh, who has just been approved by Congress as the next Fed chair. All the better for EUR/USD bears.
Those who live by the sword shall perish by the sword. Donald Trump’s tactic of pressuring the central bank is backfiring on the US government. The US president nominated his candidate, hoping to present the markets with a so-called “shadow” Fed chair. Investors were supposed to react more to his speeches than to Jerome Powell’s. However, nothing came out of it. Powell remains a member of the FOMC through 2028 and has promised to keep a low profile. Such subtle humor is a sign of victory.
Market Expectations for Fed Interest Rate
Source: Wall Street Journal.
Jerome Powell’s stance, combined with his assessment that the labor market is stabilizing while inflation remains uneven, suggests that rate cuts are unlikely in the near term. Following the press conference, futures markets increased the implied probability of a rate hike in 2026 to 14.5%. At the same time, dissent within the Federal Open Market Committee has grown. Three members opposed earlier guidance suggesting that easing was more likely than tightening. With Steven Miran, the number of dissidents has risen to four, a situation not seen since 1992.
Number of FOMC Dissents
Source: Bloomberg.
JPMorgan Chase views the growing number of dissenters opposed to resuming monetary easing as a signal to Kevin Warsh. Over the coming weeks, this dissent could evolve into a stronger case for keeping policy tight—or even considering further rate hikes. Pressure from the US administration for rate cuts is becoming a source of tension. Meanwhile, financial markets appear increasingly cautious, closely monitoring any shifts in policy direction.
When monetary policy is eased in a strong economy, investors demand a higher inflation risk premium, pushing Treasury yields higher. This is exactly what happened during the previous easing cycle. As a result, borrowing costs in the US did not decline as much as expected.
10-Year Treasury Yield and Fed Funds Rate
Source: Bloomberg.
The April FOMC meeting ended with increased market confidence that there will be no easing of monetary policy in the near future. This is good news for the US dollar.
Weekly Trading Plan for EUR/USD
Short positions on the EUR/USD pair opened at 1.173 can be maintained and increased with the targets of 1.1615 and 1.156.
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
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