Forecast: USD Strengthens as Gold Declines and EUR/USD Reaches Two-Month Low

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Fed Minutes Highlight Policy Divide

The recent release of the Fed’s September meeting minutes has shed light on a policy divide among policymakers when it comes to interest rate adjustments. While a 50-basis point cut was enacted last month, it was revealed that some officials favored a more moderate 25-basis point reduction. This lack of consensus, combined with stronger-than-expected U.S. jobs data, has caused traders to rethink the future outlook for rate cuts.

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For example, Dallas Fed President Lorie Logan supported the rate cut but expressed a preference for smaller reductions in the future due to ongoing inflation risks. The comments of other Fed officials, such as Boston Fed President Susan Collins and San Francisco Fed President Mary Daly, are closely watched for further clues about the central bank’s evolving policy stance.

Currently, market participants are predicting an 83% probability of a 25-basis point cut at the Fed’s November meeting, with an additional 50 basis points expected by the end of the year. Despite the dovish tone of the minutes, the robust labor market data has tempered expectations for aggressive easing, creating a favorable environment for the U.S. dollar.

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Euro Weakens, Yen Faces Volatility

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