All Eyes on the Fed: Rate Cut, Projections, and Powell in Key Focus

The EUR/USD pair remains flat early during Wednesday's European trading as markets await the U.S. Federal Reserve’s (Fed) interest rate decision later today. Traders are largely pricing in a third consecutive 25-basis-point rate cut.

The Fed is expected to lower its key rate to a range of 3.50%–3.75%, the lowest level in nearly three years. All eyes will be on Fed Chair Jerome Powell’s press conference, as his comments could provide guidance on the number of rate cuts projected for next year. Any hints of a more hawkish stance could strengthen the U.S. dollar, putting near-term pressure on the euro.

Market expectations for 2026 rate cuts have softened amid ongoing inflation concerns and signs of a resilient U.S. economy. Tuesday’s JOLTS report from the Labor Department showed job openings rising to 7.67 million in October, surpassing forecasts of 7.20 million, which adds support to the dollar.

Meanwhile, across the Atlantic, the European Central Bank (ECB) appears to be pausing its rate-cutting cycle. ECB President Christine Lagarde recently noted that the Eurozone economy is in a “good place,” with inflation approaching the 2% target. Lagarde emphasized a data-dependent, meeting-by-meeting approach, signaling no commitment to a predefined path for future rates. This cautious stance could provide some support for the euro against the U.S. dollar.

Bitcoin traded higher early on Wednesday following a modest rebound as investors positioned ahead of a widely anticipated U.S. Federal Reserve rate cut, though gains were tempered by expectations of hawkish policy signals.

Bitcoin has remained largely rangebound in recent days, following one of its steepest monthly declines in years during November amid broad market sell-offs.

Investors expect the central bank to signal that further easing is not guaranteed, citing persistent inflation and divisions within the Federal Open Market Committee. Fed Chair Jerome Powell’s remarks and updated economic projections will be closely watched, as any hawkish tone could strengthen the U.S. dollar, push Treasury yields higher, and weigh on non-yielding assets such as Bitcoin.

The potential impact also extends to cryptocurrency-linked exchange-traded products, which have seen strong inflows this year amid optimism over AI investments and growing institutional participation.

In a regulatory shift, the Office of the Comptroller of the Currency (OCC) announced that national banks can now act as intermediaries in cryptocurrency transactions. Under the new guidance, banks can perform “riskless principal” trades, buying and immediately reselling crypto assets without holding them on their books. The move is part of a broader effort to integrate traditional finance more closely with the digital-asset sector.

Oil prices edged lower on Tuesday after a 2% drop in the previous session, as investors weighed developments in Ukraine, ample supply concerns, and the impending U.S. Federal Reserve interest rate decision.

Ukrainian President Volodymyr Zelenskiy is set to share a revised peace plan with the U.S. following discussions in London with France, Germany, and Britain. A potential resolution between Ukraine and Russia could lift sanctions on Russian companies, releasing previously restricted oil supply.

Supply pressures persist as oil cargoes at sea have risen by 2.5 million barrels per day since mid-August.

Investors are now turning to the upcoming International Energy Agency (IEA) December report, which may provide further clarity on global supply trends.

U.S. crude inventories fell by 4.78 million barrels last week, while gasoline and distillate stocks rose, according to American Petroleum Institute data. The Energy Information Administration will release its official weekly figures on Wednesday.

Wall Street futures traded in a narrow range on Tuesday evening as investors awaited the conclusion of the Federal Reserve’s two-day meeting, where a 25-basis-point rate cut is widely expected. Markets have been cautious in recent sessions, unsure of the Fed’s economic outlook. Futures followed a muted session on Wall Street, with limited enthusiasm even after the U.S. allowed Nvidia to export more advanced chips to China. Volatility is expected to remain elevated until the Fed releases its policy statement and updated economic projections. Investors are bracing for any hints on the central bank’s approach to interest rates in 2025.

Investors are almost certain the Fed will deliver a 25-basis-point cut, supported by signs of cooling inflation and labor-market strength. However, markets remain wary of hawkish signals, as the central bank will still lack complete data for October and November. Investors are also focused on earnings from Oracle and Broadcom for clues on the AI-driven market. Oracle, a major AI computing provider, reports Wednesday, while chipmaker Broadcom reports Thursday. Software giant Adobe and retail leader Costco will also release results later this week, providing further insights into AI and broader economic trends.