Fed rate cut drives USD lower across majors, risk appetite surges

Major currency pairs strengthened against the US dollar as the Federal Reserve delivered its first rate cut since early 2024, reducing the federal funds rate and hinting at additional easing measures in 2025. The dollar index dropped 0.45% to 103.20, with futures markets jumping to fresh record highs on renewed risk appetite. EUR/USD gained momentum above 1.0950, while commodity currencies like AUD/USD and NZD/USD posted gains exceeding 0.7% as risk-on sentiment dominated. The Fed's policy shift marks a significant turning point after maintaining higher rates for combating inflation throughout 2024. Market participants are now pricing in a 65% probability of another 25bp cut at the next FOMC meeting. Technical analysis shows the DXY breaking below its 50-day moving average at 103.50, suggesting further downside potential toward 102.80 support. Traders should monitor upcoming US inflation data for confirmation of the Fed's dovish trajectory.