Fed Holds Rates in July - September Cut Now Fully Priced

The Federal Reserve left its benchmark rate unchanged at 4.25%-4.50% at the July 2026 FOMC meeting, a decision that was universally expected by markets. What moved prices was the language in the statement and Chair Powell's press conference remarks, which clearly opened the door to a September cut.

What Powell Said

Powell used the phrase "further progress on inflation" twice in his opening statement and acknowledged that the labour market has "come into better balance." He stopped short of pre-committing to a September move but said the committee would be ready to act "if the data supports it." Fed funds futures immediately repriced, putting a 92% probability on a 25 bps cut in September.

Market Reaction

• Gold: rose $28 to $3,358
• DXY (Dollar Index): fell 0.5% to 102.8
• EUR/USD: gained 60 pips to 1.1140
• Bitcoin: jumped 3.2% to $107,500
• US 10-year yield: fell 8 bps to 4.12%

What This Means for Traders

A September cut, if delivered, would represent a fundamental shift in the rate cycle. Historically, the first cut in a new easing cycle has been strongly positive for gold and risk assets in the 3-6 months following. The Dollar typically weakens, which supports EUR/USD, GBP/USD, and commodity currencies like AUD and NZD.

Traders should favour assets that benefit from lower rates: gold, growth-sensitive currencies against USD, and Bitcoin as an institutional risk asset. However, the data dependency means any single strong CPI or NFP print could rapidly change expectations.