Dollar recovers following the Fed’s sharp rate cut

The U.S. dollar rallied across the board, reversing earlier declines after the Federal Reserve delivered an aggressive half-percentage-point interest rate cut. This marked the start of a monetary easing cycle aimed at maintaining low unemployment as inflation softens. Chair Jerome Powell’s statement reiterated the central bank’s commitment to its dual mandate of employment and inflation. Markets had largely anticipated this cut, with many already factoring in a 50 basis-point reduction based on prior media leaks. However, it surprised some economists, who were expecting a smaller, 25 basis-point move. Despite these mixed expectations, traders responded to the actual decision with a ‘buy the rumour, sell the fact’ pattern, causing the dollar to claw back losses.

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