Insights 
VT 
The Federal Reserve’s Anna Paulson supports the idea of implementing two additional 25 basis point cuts in 2025. She mentioned that tariffs are not expected to cause persistent inflation, describing current monetary policies as moderately restrictive.
Paulson foresees a narrow base of support for economic growth and labour market stability, with increasing risks. Despite these challenges, she anticipates that by 2026, the economy will grow near its potential, with inflation initially rising then subsiding.
The US Dollar Strength
The US Dollar shows strength, notably against the Euro, while percentage changes against other major currencies vary. For instance, USD gains 0.38% against the Euro and 0.16% against the British Pound but declines by 0.13% against the Canadian Dollar.
Market movements reflect a recovery in stocks, supported by eased US-China trade tensions, impacting major currency pairs like EUR/USD and GBP/USD. Gold continues to reach record highs, driven by global uncertainties, and the crypto market shows signs of recovery with Dogecoin rebounding from a recent dip.
FXStreet Insights offers a variety of content, emphasising the impact of global events on markets. This includes updates on forex and cryptocurrency markets, driven by economic changes and geopolitical tensions.
Monetary Policy and Market Impacts
We are now seeing a clearer path for monetary policy with the signal for two more 25 basis point cuts this year. This aligns with the view that current policy is modestly restrictive and the Federal Reserve is preparing to ease further. The plan appears to be a gradual adjustment rather than a rapid shift.
This dovish stance is likely a response to the softening labor market, which has been a growing concern. We have seen a gradual rise in the unemployment rate to 4.2% in the last report for September 2025, a noticeable increase from the sub-4% levels that characterized much of 2023 and 2024. This suggests the “narrow base for growth” mentioned is becoming more apparent in the hard data.
The dismissal of tariffs as a source of sustained inflation shows confidence that underlying price pressures are contained. We remember the aggressive rate-hiking cycle of 2022-2023, which successfully brought the Core Personal Consumption Expenditures (PCE) index down from its highs. The Fed now seems willing to look past short-term supply shocks to focus on its dual mandate.
While the US Dollar is showing strength today, the forward guidance from the Fed suggests this may be a short-term move. Derivative traders should consider positioning for a weaker dollar in the coming weeks. We could look at buying out-of-the-money put options on the US Dollar Index (DXY) with December 2025 expiries to capitalize on this expected decline.
The clear signal for 50 basis points of further cuts by year-end should reduce uncertainty around the Fed’s path. This suggests that interest rate volatility may decline in the near term. We could explore strategies like selling strangles on Treasury note futures, which would profit if rates stabilize within an expected range.
The environment of falling interest rates is highly supportive for non-yielding assets like gold. With the metal already breaking record highs, as mentioned in today’s reports, we should consider this a tailwind for further gains. Buying call options on gold futures (GC) or a major gold ETF offers a way to participate in the upside with defined risk.
