Anna Paulson from the Federal Reserve supports the idea of two more interest rate cuts of 25 basis points each in 2025. She believes tariffs won’t lead to long-term inflation and describes current monetary policies as moderately restrictive. Paulson sees limited support for economic growth and job market stability, with rising risks. Despite this, she expects the economy to grow close to its potential by 2026, with inflation rising initially before settling down.

The US Dollar Strength

The US Dollar is strong, especially against the Euro. It has increased by 0.38% against the Euro and 0.16% against the British Pound, but it has fallen by 0.13% against the Canadian Dollar. Stock market movements show recovery, helped by improved US-China trade relations, affecting key currency pairs like EUR/USD and GBP/USD. Gold prices continue to hit record highs due to global uncertainties, and the cryptocurrency market is showing signs of life, with Dogecoin recovering from a recent drop. FXStreet Insights provides various updates about how global events affect markets, including forex and cryptocurrency trends linked to economic shifts and geopolitical issues.

Monetary Policy and Market Impacts

There’s a clearer direction for monetary policy now, with expectations for two more 25 basis point rate cuts this year. This reflects the current policy being slightly restrictive, with the Federal Reserve ready to ease further. The approach is gradual rather than abrupt. This cautious stance likely responds to a weakening labor market, which is becoming a growing worry. The unemployment rate has risen to 4.2% as of September 2025, up from below 4% in 2023 and 2024. This confirms the “narrow base for growth” that has been discussed. Dismissals of tariffs as a cause of lasting inflation indicate confidence that core price pressures are controlled. The aggressive rate hikes from 2022-2023 successfully lowered the Core Personal Consumption Expenditures (PCE) index from its peak. The Fed now seems willing to overlook short-term supply shocks to maintain its goals. While the US Dollar is strong today, the Fed’s guidance suggests this may be temporary. Traders should consider preparing for a weaker dollar soon. Buying out-of-the-money put options on the US Dollar Index (DXY) with December 2025 expirations could be a good strategy to benefit from this expected drop. The clear signal for 50 basis points of further cuts by the end of the year should lessen uncertainty about the Fed’s direction. This hints that interest rate fluctuations may decrease soon. Strategies like selling strangles on Treasury note futures could be explored, allowing profits if rates remain stable within a expected range. As interest rates fall, this is favorable for non-yielding assets like gold. With gold already reaching record highs, this trend is expected to continue. Considering buying call options on gold futures (GC) or a major gold ETF could be a way to take advantage of potential gains while keeping risk defined. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now