Dollar Slips Lower After Fed Rate Cut; Euro Set for Weekly Gains
In a swift reaction to the Federal Reserve’s latest policy move, the U.S. dollar fell against major currencies on Friday, extending a retreat that began moments after the Fed delivered a widely anticipated rate cut. The euro, meanwhile, is on track to notch solid weekly gains as investors shift toward currencies seen as benefiting from a softer U.S. rate outlook.
The Fed reduced its benchmark interest rate by 25 basis points, citing easing inflation pressures and a cooling labor market. While officials stressed that future cuts will remain “data-dependent,” markets interpreted the move as the start of a gradual pivot toward a more accommodative stance.
The U.S. Dollar Index dipped further in early European trading, while the EUR/USD pair climbed, supported not only by dollar weakness but also by improving sentiment toward the eurozone’s economic recovery prospects. Analysts say the euro’s momentum reflects expectations that the European Central Bank will maintain a steadier policy path, avoiding aggressive easing for now.
Market strategist Lena Hartwell called the reaction “textbook,” noting that “a rate cut lowers the yield appeal of the dollar, and with eurozone indicators stabilizing, investors are finding room to rotate back into the euro.”
Equity markets responded positively, with U.S. futures edging higher and European stocks opening in the green. Treasury yields slipped, mirroring the dollar’s decline.
What Happens Next
Traders will turn their attention to upcoming U.S. jobs data and inflation releases, which could determine whether the Fed continues easing this year. Any signs of renewed economic softness may accelerate dollar losses. For the euro, next week’s ECB communications will be crucial in confirming whether policymakers remain comfortable with the currency’s recent strength.
For now, the message from global markets is clear: the Fed’s shift has put the dollar on the defensive—while giving the euro room to rally.
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