Markets rallied following the Federal Reserve’s third consecutive rate cut, as Chair Jerome Powell’s emphasis on tariff-driven transitory inflation and expected labor market stabilization outweighed concerns about the deeply divided FOMC vote and limited 2026 easing projections.

The Bank of Canada’s decision to hold rates steady earlier in the session reinforced the narrative of major central banks nearing the end of their cutting cycles amid resilient growth.

Check out the forex news and economic updates you may have missed in the latest trading session!

Forex News Headlines & Data:

• New Zealand Visitor Arrivals for October 2025: 9.4% y/y (3.0% y/y forecast; 9.6% y/y previous)
• Japan Reuters Tankan Index for December 2025: 10.0 (12.0 forecast; 17.0 previous)
• Japan PPI for November 2025: 0.3% m/m (0.2% m/m forecast; 0.4% m/m previous); 2.7% y/y (2.6% y/y forecast; 2.7% y/y previous)
• China Consumer Price Index Growth Rate for November 2025: -0.1% m/m (0.1% m/m forecast; 0.2% m/m previous); 0.7% y/y (0.6% y/y forecast; 0.2% y/y previous)
• China Producer Prices Index growth rate for November 2025: -2.2% y/y (-2.0% y/y forecast; -2.1% y/y previous)
• ECB President Lagarde said the euro area economy has been more resilient than expected and suspects the ECB will revise growth projections higher at next week’s meeting
  • ECB’s Villeroy: there is no reason to raise interest rates soon
  • Lithuanian central bank governor Simkus: rates can probably stay at 2% at further meetings
• U.S. MBA 30-Year Mortgage Rate for December 5, 2025: 6.33% (6.32% previous)
  • U.S. MBA Mortgage Applications for December 5, 2025: 4.8% (-1.4% previous)
• U.S. Employment Cost – Wages QoQ for September 30, 2025: 0.8% (0.8% forecast; 1.0% previous)
• U.S. Employment Cost Index QoQ for September 30, 2025: 0.8% (0.8% forecast; 0.9% previous)
• Canada BoC Interest Rate Decision for December 10, 2025: 2.25% (2.25% forecast; 2.25% previous)
• U.S. EIA Crude Oil Stocks Change for December 5, 2025: -1.81M (0.57M previous)
• FOMC voted 9-3 to lower the benchmark federal funds rate by a quarter point to a range of 3.5%-3.75%
• The Summary of Economic Projections (SEP) for 2025 signaled only one rate cut in 2026, inline with September’s projections
• U.S. Monthly Budget Statement for November 2025: -173.0B (-390.0B forecast; -284.0B previous)

Broad Market Price Action:

Risk appetite surged on Wednesday as traders embraced Fed Chair Powell’s optimistic assessment that tariff-induced inflation pressures would prove transitory while rate cuts would help stabilize the labor market, sending equities and commodities sharply higher while the dollar and bond yields retreated.

The S&P 500 gained 0.65% to close at 6,882.9, pushing just shy of all-time highs. The index traded sideways ahead of the FOMC decision, then spiked higher immediately following Powell’s press conference as his characterization of the rate cut as a “further normalization” rather than the start of an aggressive easing cycle relieved concerns about stagflation risks. The Russell 2000 small-cap index surged 1.3% to a fresh record, benefiting from the lower-rate environment more acutely than large caps.

Gold advanced 0.46% to settle around $4,227, extending its record-breaking run despite some intraday volatility. The precious metal dipped during the London session ahead of the FOMC event, then rallied during Powell’s press conference as lower real yields, Dollar weakness and ongoing concerns about fiscal sustainability likely combined to provide support.

WTI crude oil emerged as the session’s best-performing major asset, rallying 1.27% to $58.80. The energy complex showed particular strength following the EIA’s report of a 1.81-million-barrel inventory draw versus expectations for a build, signaling tighter-than-expected supply conditions. Oil extended gains during the Powell press conference, possibly benefiting from his optimistic growth outlook for 2026 which upgraded GDP forecasts to 2.3% from 1.8%.

Bitcoin declined 0.47% to trade around $92,209, diverging from the broader risk-on tone. The cryptocurrency showed relative strength ahead of the Fed decision, trading higher throughout the Asian and London sessions, spiked higher on the FOMC news but reversed sharply lower following the FOMC press conference. The selloff seemed to correlate with the Fed’s hawkish tilt—maintaining only one projected cut for 2026 despite delivering today’s reduction—suggesting crypto traders interpreted the decision as limiting further monetary accommodation.

The 10-year Treasury yield fell 0.98% to settle near 4.20%, dropping from morning session highs around 4.21% that marked the highest level since early September. Bond yields declined throughout the U.S. afternoon session following the FOMC statement, with the selloff accelerating during Powell’s press conference as his dovish characterization of inflation dynamics (“tariffs are causing most of the inflation overshoot”) likely outweighed the committee’s limited 2026 cutting projections.

FX Market Behavior: U.S. Dollar vs. Majors

The U.S. dollar suffered broad-based losses on Wednesday, ending as the worst-performing major currency after initially trading with mixed but bearish undertones through the Asian and early London sessions, then collapsing following the FOMC decision and Chair Powell’s press conference.

During the Asian session, the greenback traded choppy with a net bearish lean despite there being no major U.S.-specific catalysts. The dollar’s weakness seemed to correlate with soft Chinese inflation data showing headline CPI at -0.1% m/m versus 0.1% forecast and deeper-than-expected PPI deflation at -2.2% y/y, which may have supported expectations for more aggressive central bank easing to counter global disinflationary pressures.

The London session saw the dollar’s decline accelerate early before finding temporary stabilization ahead of the U.S. open. The morning weakness possibly reflected positioning adjustments ahead of the Bank of Canada decision and FOMC announcement, with traders likely reducing long-dollar exposure given the near-certainty of a Fed cut. ECB members’ comments suggesting rates could stay at current levels for an extended period possibly provided modest support for the euro against the dollar during this session.

The decisive breakdown came during the U.S. session following the 2:00 PM EST FOMC statement and accelerated during Powell’s 2:30 PM press conference. While the Fed delivered the widely expected 25-basis-point cut with an unprecedented three dissents—Chicago’s Goolsbee and Kansas City’s Schmid preferring no cut, while Governor Miran favored a 50-basis-point reduction—the dollar’s collapse seemed most directly driven by Powell’s dovish framing. His characterization that “tariffs are causing most of the inflation overshoot” and expectation that their impact would “fade next year” with goods inflation peaking in Q1 undermined the hawkish case for holding rates steady.

Additionally, Powell’s optimistic growth forecasts—upgrading 2026 GDP to 2.3% from 1.8% while projecting inflation declining to 2.4%—suggested the Fed could afford to ease policy without reigniting price pressures.

Upcoming Potential Catalysts on the Economic Calendar

• New Zealand Manufacturing Sales for September 30, 2025 at 9:45 pm GMT
• Japan BSI Large Manufacturing for December 31, 2025 at 11:50 pm GMT
• U.K. RICS House Price Balance for November 2025 at 12:01 am GMT
• Australia Employment Change & Unemployment Rate for November 2025 at 12:30 am GMT
• Swiss National Bank Interest Rate Decision for December 11, 2025 at 8:30 am GMT
• U.K. BOE Kroszner Speech at 9:00 am GMT
• Canada Balance of Trade for September 2025 at 1:30 pm GMT
• U.S. Initial Jobless Claims for December 6, 2025 at 1:30 pm GMT
• U.S. Balance of Trade for September 2025 at 1:30 pm GMT
• U.S. Wholesale Inventories for September 2025 at 3:00 pm GMT
• New Zealand Business NZ PMI for November 2025 at 9:30 pm GMT
• U.S. Fed Balance Sheet for December 10, 2025 at 9:30 pm GMT

Thursday’s calendar features two top-tier events that could generate volatility bursts, though overall market activity is likely to remain subdued compared to Wednesday’s Fed-driven session.

The Swiss National Bank rate decision at 8:30 am GMT represents the day’s most significant scheduled catalyst, with markets closely watching whether the SNB will follow the Fed’s cautious approach or signal more aggressive easing given Switzerland’s proximity to zero inflation. Following the ECB’s recent hawkish commentary about rates potentially staying at current levels, any SNB divergence could drive meaningful franc volatility.

The Australian employment report at 12:30 am GMT could set the tone for Asian trading, with recent strength in labor markets potentially influencing RBA rate cut expectations. Any significant deviation from consensus could impact AUD positioning ahead of the European session.

U.S. Initial Jobless Claims at 1:30 pm GMT take on heightened importance following Chair Powell’s emphasis on labor market stabilization as a key rationale for Wednesday’s rate cut. With the government shutdown having delayed October and November employment data, weekly claims represent the most timely labor market signal available. A significant rise in claims could reignite concerns about labor market deterioration that Powell sought to address, potentially supporting further dollar weakness and reinforcing rate cut expectations.

Markets may trade cautiously as participants digest Wednesday’s divided FOMC vote and Powell’s nuanced messaging about the Fed being “well positioned to wait” before additional moves, suggesting a higher bar for January action. Fresh commentary from central bankers—including the BoE’s Kroszner—could provide additional color on the global rate outlook as policymakers across developed markets signal increasing caution about further easing.

Stay frosty out there, forex friends, and don’t forget to check out our Forex Correlation Calculator when planning to take on risk!