The US dollar edged lower on Thursday morning, giving up part of the gains recorded the previous night as traders digested the outcome of the Federal Reserve meeting and the results of trade talks between the United States and China.

At 05:20 a.m. ET (09:20 GMT), the US Dollar Index — which measures the greenback’s performance against a basket of six major currencies — slipped 0.1% to 98.950 after touching a two-week high on Wednesday.

Dollar supported by fading rate-cut expectations

The Federal Reserve cut interest rates by 25 basis points to a range between 3.75% and 4.00%, a move that was widely expected. However, uncertainty remains over whether another reduction will come later this year amid limited economic data due to the ongoing US government shutdown.

In a press conference following the decision, Fed Chair Jerome Powell said another similar rate cut in December was “far from guaranteed.”

After his comments, traders lowered their expectations for a December rate cut to 71%, down from 90% previously.

Analysts at ING wrote: “The Fed’s message makes it difficult to sell the dollar now. We would need very weak labor market data for markets to price in an additional 75-basis-point cut next summer — otherwise, even one more 25-point cut may drop out of current pricing.”

The dollar also found support from lingering uncertainty surrounding trade negotiations between US President Donald Trump and Chinese President Xi Jinping.

Trump described the meeting — the first between the two leaders in six years — as “wonderful” and announced that the United States would immediately reduce tariffs on Chinese goods.

He added that Beijing had pledged to help combat the smuggling of chemicals used in producing the opioid fentanyl and agreed to suspend export restrictions on rare earth metals.

However, analysts at Vital Knowledge said these developments “do not fundamentally change the current state of US–China trade relations.”

Euro supported by French GDP data

In Europe, the euro rose 0.2% to 1.1618 against the dollar after data showed that France — the eurozone’s second-largest economy — grew by 0.5% in the third quarter, exceeding market expectations of 0.2%.

The French economy had previously expanded by 0.3% in the second quarter.

Investors now await the region-wide GDP figures later in the day, expected to show quarterly growth of just 0.1%, or 1.2% year-on-year.

ING analysts noted: “While sentiment indicators have improved, actual data over the summer were weak. Without a major upside surprise in eurozone GDP, it will be hard for EUR/USD to gain further traction.”

The European Central Bank is expected to keep interest rates unchanged at its meeting later today. ING added: “We doubt that President Christine Lagarde will seek to shift market expectations, which currently lean only slightly toward a new rate cut within the next nine months.”

Sterling steady, yen weaker

The British pound edged up 0.1% to 1.3199 but remained near Wednesday’s five-and-a-half-month low.

In Asia, the dollar gained 0.7% against the yen to 153.74 after the Bank of Japan left interest rates unchanged and maintained a cautious outlook on the economy.

The central bank warned that Japan’s economy faces increasing near-term uncertainty but reiterated that its accommodative stance will help cushion the impact. It also reaffirmed that it will raise rates only if its projections for growth and inflation are met.

Meanwhile, China’s yuan slipped 0.2% to 7.1089 against the dollar following the conclusion of the Trump–Xi meeting, retreating from its strongest level in a year.

Speaking to reporters after the meeting, Trump said he expects a trade agreement with China “very soon,” adding that both sides also reached deals covering rare-earth minerals and agriculture.

Gold prices rose in European trading on Thursday for the first time in five sessions, recovering from a three-week low as the impact of the Federal Reserve’s policy meeting faded and the dollar’s rally lost momentum in global currency markets.

As expected, the Federal Reserve cut its benchmark interest rate by 25 basis points to a range of 4.00%, the lowest level since November 2022 — marking the second consecutive rate reduction.

Fed Chair Jerome Powell said policymakers are struggling to reach a consensus on the future path of monetary policy, adding that markets should not assume another rate cut in December.

Price Overview

• Gold prices rose 1.35% to $3,982.65 per ounce, up from the session’s opening at $3,930.44, after touching a low of $3,915.38.

• On Wednesday, gold settled 0.45% lower, extending losses for a fourth straight session and reaching a three-week low of $3,886.64 in the prior day’s trading.

US Dollar

The US Dollar Index fell more than 0.2% on Thursday, retreating from a two-week high of 99.36 points, signaling a pause in the greenback’s upward trend against a basket of major and minor currencies.

Beyond profit-taking, the dollar’s decline was also driven by easing US–China trade tensions and sustained expectations that the Fed will cut rates again in December.

Federal Reserve

At the conclusion of its seventh policy meeting of 2025, the Federal Reserve on Wednesday lowered rates by 25 basis points to 4.00%, the lowest since November 2022 — its second consecutive cut.

The decision was supported by most members of the Federal Open Market Committee (FOMC), with two exceptions: Steven Miran, who favored a 50-basis-point cut, and Jeffrey Schmid, who preferred to keep rates unchanged.

The Fed’s policy statement maintained its characterization of the labor market, noting that job growth has slowed and unemployment has edged higher but remains low. It also said recent data indicate that economic activity continues to expand at a moderate pace, while inflation remains elevated compared to the start of the year.

Jerome Powell

Powell stated that another rate cut in December “is not a foregone conclusion” and emphasized that the FOMC is “deeply divided on how to proceed in December.”

He noted that tensions in money markets have increased over the past three weeks, prompting the Fed to adjust its liquidity operations. Powell added that the central bank is now relying on all available data — including private-sector surveys — amid the ongoing government shutdown that has halted official data releases.

Powell described the current situation as complex, with the economy caught between the risks of high inflation and labor market weakness, adding that monetary policy remains “moderately restrictive.”

US Rate Outlook

According to CME’s FedWatch Tool, after the latest meeting, market pricing for a 25-basis-point rate cut in December dropped from 99% to 70%, while the probability of no change in rates rose from 1% to 30%.

SPDR Gold Holdings

Holdings in the SPDR Gold Trust — the world’s largest gold-backed exchange-traded fund — fell by 2.87 metric tons on Wednesday to 1,036.05 metric tons, the lowest level since October 16.

The euro rose in European trading on Thursday against a basket of global currencies, resuming its gains after a brief pause yesterday versus the US dollar. The currency moved into positive territory, supported by a pullback in the dollar’s rally following the conclusion of the Federal Reserve meeting.

The advance comes ahead of the European Central Bank’s monetary policy decision later today, with markets widely expecting interest rates to remain unchanged for the third consecutive meeting.

Global investors are closely watching for any new signals from the ECB regarding the potential resumption of its monetary easing cycle next year, amid low odds of such a move in December.

Price Overview

• EUR/USD rose 0.3% to 1.1637, up from the day’s opening at 1.1600, after touching a low of 1.1597.

• The euro closed Wednesday down 0.25% against the dollar, its first loss in six sessions, following more hawkish remarks from Fed Chair Jerome Powell.

US Dollar

The US Dollar Index declined more than 0.2% on Thursday, retreating from a two-week high of 99.36 points, reflecting a pause in the greenback’s recent rally against major and minor currencies.

Beyond profit-taking, the dollar’s pullback was also driven by easing trade tensions between the United States and China, along with continued market conviction that the Federal Reserve will cut rates again in December.

European Central Bank

The ECB concludes its seventh policy meeting of 2025 later today, with expectations pointing to another pause in rate cuts. The upcoming statement is anticipated to provide further insight into the bank’s outlook for interest rates through the remainder of this year and into 2026.

Current projections suggest that the ECB will maintain its key rate unchanged at 2.15%, the lowest level since October 2022, marking the third consecutive meeting without adjustment.

The ECB rate decision and policy statement are due at 13:15 GMT, followed by a press conference from President Christine Lagarde at 13:45 GMT.

Euro Outlook

At Economies.com, we expect that if the ECB’s tone proves more hawkish than markets anticipate, the likelihood of a December rate cut will decline — a scenario that could drive further gains for the euro against a broad basket of global currencies.

The Japanese yen weakened in Asian trading on Thursday against a basket of major and minor currencies, extending its losses for the second consecutive session against the US dollar following the Bank of Japan’s decision to keep interest rates unchanged for the sixth straight meeting.

Despite holding rates steady, the central bank reiterated its readiness to raise rates in the future if economic indicators evolve in line with its projections. Investors are now awaiting the press conference by BOJ Governor Kazuo Ueda for further clues on the likelihood of a rate hike in December.

Price Overview

• USD/JPY rose about 0.3% to 153.16 yen, up from the day’s opening at 152.72 yen, after hitting a low of 152.16 yen.

• The yen closed Wednesday down 0.7% against the dollar, resuming losses after a one-day pause — its first in eight sessions — pressured by the outcome of the Federal Reserve meeting.

Bank of Japan

As widely expected, the Bank of Japan decided Thursday to make no changes to its current monetary policy tools, maintaining the benchmark rate at 0.50% — the highest since 2008 — for the sixth consecutive meeting.

The decision was backed by seven of the bank’s nine board members, while two voted in favor of raising rates to 0.75%, as they did in the previous meeting. This division highlights growing internal pressure to begin normalizing monetary policy.

The BOJ said it remains prepared to gradually raise borrowing costs if economic and financial indicators improve as anticipated.

In its quarterly report, the central bank upgraded its growth outlook for the current fiscal year and raised its inflation forecast for fiscal 2026, expecting core inflation to exceed 2% in the second half of its projection period through March 2027.

Interest Rate Outlook

• Following the meeting, market pricing for a possible 25-basis-point rate hike by the BOJ in December held steady around 50%.

• Investors are watching upcoming data on inflation, unemployment, and wage growth in Japan for further direction.

Kazuo Ueda’s Remarks

Governor Kazuo Ueda is scheduled to speak later today on the outcome of the policy meeting, with markets expecting his comments to offer stronger signals regarding the timeline for policy normalization and rate hikes this year.

Analyst Commentary

• Carol Kong, currency strategist at Commonwealth Bank of Australia, said before the BOJ decision: “We know the Bank of Japan tends to be highly sensitive to broader economic policy shifts.”

• She added: “Given the recent election of Prime Minister Sanae Takaichi’s administration and its plans for a new economic package, I believe the BOJ will remain cautious in the very near term.”