The S&P 500 and Nasdaq saw a rise following the FOMC’s decision to cut rates, injecting $40bn into the economy every month. However, the S&P 500 failed to hold its gains overnight, dropping to 6,820 due to cautious market movements influenced by Powell’s conferences.
The Federal Reserve implemented a 25 basis points rate cut, resulting in a target range of 3.50–3.75%. This action triggered a decline in the US Dollar, with commodities like gold reaching above $4,250, and stocks and digital currencies like Solana facing pressure.
Impacts of US Employment Data
GBP/USD exceeded 1.3400 following unfavourable US employment data. EUR/USD climbed past 1.1730 due to weaker-than-expected US job figures, with the Dollar Index continuing its decline despite Fed actions.
Various assets are experiencing shifts, with AUD/USD testing yearly peaks and NZD/USD rising for the fifth day. Gold is nearing its record high, and there’s emphasis on selecting the best brokers for trading in 2025, offering insights into various markets and trading platforms.
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Market Strategy and Opportunities
Given the Fed’s recent rate cut to the 3.50-3.75% range, we are now operating in an environment of confirmed monetary easing. This policy shift, combined with a new $40 billion monthly QE program, signals a clear bearish stance on the US Dollar. The market is ignoring the Fed’s supposedly cautious tone and focusing on the action, which should guide our strategy in the coming weeks.
The dollar’s weakness is the most dominant theme, creating straightforward opportunities in major currency pairs. We see EUR/USD breaking above 1.1730 and GBP/USD clearing 1.3400, fueled by soft US labor data like the recent Initial Jobless Claims that jumped to 255,000. Options strategies favoring further dollar depreciation, such as buying calls on these pairs, look attractive.
In equities, the S&P 500’s reaction has been volatile, surging past 6,870 only to retreat, which is typical after a major Fed announcement. This level is now a critical pivot point for index futures traders; a sustained break above would confirm the rally, but another failure could invite short-sellers. We’ve seen similar choppy price action during the policy pivot of 2019 before a clearer trend emerged.
Gold has been the standout performer, soaring above $4,250 an ounce as lower yields and a falling dollar create a perfect storm for bullion. This powerful trend shows little sign of slowing and is now targeting the record highs around $4,380. We should consider using call options to ride this momentum while managing risk.
Commodity currencies are also benefiting, with AUD/USD testing its yearly peak and NZD/USD showing persistent strength. However, we note that some technical indicators are flashing overbought signals, particularly for the Aussie dollar. It may be wise to wait for a slight pullback before initiating new long positions in these pairs.
