The U.S. Federal Reserve Prepares for Further Rate Cuts

[Ben Graham]

The U.S. dollar weakened and gold rose after Federal Reserve Governor Christopher Waller supported further interest rate cuts, saying that this would help return central bank policy to a neutral level. At the same time, he noted that there is no need to rush such a move for now.

Describing a scenario in which inflation continues to slow through 2026, Waller said that monetary policy settings are currently about 100 basis points above the neutral level. "Since inflation is still high, we can afford to be patient—there is no need to cut rates quickly," Waller said. "But we should gradually push policy toward the neutral level."

Investors interpreted Waller's comments as a signal that the Fed may maintain a dovish stance in the future. Although Waller emphasized the lack of urgency in cutting rates, his acknowledgment that current monetary policy remains in restrictive territory strengthened market expectations for future easing.

These remarks were Waller's first since Fed officials cut interest rates for the third consecutive time last week. However, the decision was not unanimous. There were three dissenters, highlighting deep divisions within the committee. Policymakers also subtly changed the wording of their statement, hinting at greater uncertainty over when they might cut rates again.

Waller, whose candidacy is being considered for the position of the next Fed chair, is now taking a more dovish stance—one that Trump is demanding from the future head of the Federal Reserve.

"Absolutely. I have devoted 20 years of my life to working on the issue of central bank stability and why it matters. There is no doubt that I have many proposals for developing and maintaining the stability of our economy," Waller said.

As for the current technical picture of EUR/USD, buyers now need to focus on taking the 1.1730 level. Only this would allow a move toward testing 1.1750. From there, the pair could climb to 1.1770, but doing so without support from major players would be quite difficult. The most distant target would be the high at 1.1805. In the event of a decline, only around the 1.1705 level do I expect any serious action from large buyers. If there is no activity there, it would be preferable to wait for a retest of the 1.1685 low or to open long positions from 1.1650.

Regarding the current technical picture of GBP/USD, pound buyers need to break through the nearest resistance at 1.3405. Only this would allow a move toward 1.3425, above which a breakout would be quite difficult. The furthest target would be the 1.3450 level. In the event of a decline, bears will attempt to seize control of the 1.3360 level. If they succeed, a break of this range would deal a serious blow to bullish positions and push GBP/USD down to the 1.3340 low, with the prospect of a further move toward 1.3310.

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