Dollar Hold the Edge on “Hawkish Cut”, Eyes on Major Central Banks Next

Market Insights – October 30, 2025, brought to you by Ultima Markets

The global market tone turned highly volatile following the U.S. Federal Reserve’s pivotal meeting overnight, with traders now bracing for back-to-back decisions from the Bank of Japan (BoJ) and the European Central Bank (ECB) later today.

FOMC Recap: A Cautious Powell Shifts the Outlook

The Fed delivered its second consecutive 25-basis-point rate cut at the October meeting, as widely expected. However, Chair Jerome Powell’s press conference that followed fundamentally altered the market’s outlook on further easing.

• Key Shift: Powell explicitly refrained from confirming a December rate cut, stressing that another move is “far from a foregone conclusion.” He emphasized that policy will remain strictly data-dependent going forward.
• Voting Split: The decision was not unanimous — one official voted to hold rates unchanged, while another favored a 50-basis-point cut amid rising concerns about recession risks. This underscores a deep internal divergence within the FOMC.
• Market Reaction: The Fed’s cautious tone crushed expectations for aggressive easing. The probability of a December cut plunged from nearly 90% to just 32%, according to the CME FedWatch Tool. The dollar surged sharply as traders unwound short positions, while equities and gold reversed gains.

Powell reinforced this stance with a strong tone during the news conference, saying:

“A further reduction in the policy rate at the December meeting is not a foregone conclusion — far from it.”

He also acknowledged that “strongly different views” were expressed among the 19 FOMC participants, adding that this divergence will be detailed in the meeting minutes, due for release in three weeks.

Market Implications

The U.S. dollar’s rebound suggests traders are realigning with a less dovish Fed stance, while equities may face short-term volatility as risk sentiment adjusts.

USDX, H4 Chart | Ultima Market MT5

The U.S. Dollar Index (USDX) rebounded sharply following the Fed meeting, maintaining its overall bullish structure.

The dollar now appears poised to challenge the 99.00 resistance level, particularly if upcoming policy decisions from the ECB and BoJ reinforce policy divergence with the Fed. A clear divergence could fuel further dollar strength in the near term.

Central Bank Preview: Policy Divergence Day?

The global monetary policy spotlight now shifts to Japan and Eurozone, where the contrast with the now-cautious Fed will drive volatility. Here are the quick outlook on both central banks today:

Bank of Japan (BoJ) – The Immediate Catalyst

The Bank of Japan is widely expected to keep its policy rate unchanged at 0.5%.

Traders will closely monitor Governor Ueda’s comments for any hint of a potential rate hike, although a move today appears highly unlikely given the pro-stimulus stance of the Takaichi administration.

The widening interest rate differential, driven by the Fed’s hawkish tone, remains fundamentally supportive for USD/JPY, unless the BoJ surprises markets with a policy shift.

European Central Bank (ECB)

The European Central Bank is also anticipated to leave its key rates unchanged in today’s meeting. President Christine Lagarde will likely face questions about the Eurozone’s growth outlook and whether rising global trade tensions are influencing the ECB’s economic projections.

A neutral, data-dependent tone is expected, which, when contrasted with the Fed’s “hawkish cut,” could keep EUR/USD under sustained downside pressure as the U.S. dollar regains strength.

Technical Outlook: EURUSD, USDJPY

With the U.S. dollar surging following the Fed’s hawkish tone, the immediate focus now lies on whether the Dollar Index can sustain gains above the 99.00 level. Should both the BoJ and ECB deliver more dovish or neutral signals in contrast to the Fed, the dollar could extend its short-term bullish momentum.

USDJPY

USDJPY, H4 Chart | Ultima Market MT5

USD/JPY rallied sharply after the FOMC decision, pushing toward multi-month highs near 153.00.

The technical bias remains bullish, with the path of least resistance pointing higher. A status quo decision from the BoJ would likely reinforce upward momentum, paving the way for a potential test of resistance around 153.50 and beyond.

EURUSD

EUR/USD, H4 Chart | Ultima Market MT5

EUR/USD fell sharply in the aftermath of the Fed meeting, briefly breaking below the critical 1.1600 support before rebounding.

The pair remains confined within a converging triangle formation, with the near-term bias leaning bearish—particularly if the ECB delivers a dovish tone. A decisive break below 1.1600 would expose the pair to further downside toward 1.1550.

Daily Takeaway

Despite the dollar’s strong rebound following the Fed’s “hawkish cut,” traders should remain cautious as the 99.00 level on the Dollar Index remains a key resistance zone. Sustained gains above this level will depend heavily on whether the BoJ and ECB reaffirm or diverge from the Fed’s cautious tone.

If both central banks maintain a neutral or dovish stance, policy divergence could extend the dollar’s short-term strength. However, failure to decisively break above 99.00 would suggest that markets are not overpricing expectations for a deeply dovish Fed, keeping the broader trend in a consolidation phase until clearer signals emerge.

Disclaimer

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