Fed Signals Shift from Cuts to Hikes, Euro Declines

The Federal Reserve left the federal funds rate unchanged at 3.50%-3.75% following Kevin Warsh's inaugural meeting as chair. While the hold itself was widely expected, the accompanying statement and tone were seen as replacing a prior bias toward rate cuts with a readiness to resume tightening.

Currency markets reacted swiftly, with the euro weakening against the dollar as traders priced in a more hawkish Fed trajectory. No explicit forward guidance was released beyond the rate decision, but the shift in language was enough to drive EURUSD lower.

Analysts noted that the move marks a significant departure from recent policy expectations and could set the stage for further USD strength in the near term.