USD Weakens as Fed Rate Cut Rally Fades on Limited Easing Concerns

The US dollar has strengthened across major pairs as initial optimism from the Federal Reserve's first rate cut of 2025 quickly dissipated. Markets are reassessing the Fed's capacity for further easing, with traders scaling back expectations for aggressive rate reductions throughout the year. The dollar index (DXY) recovered 0.4% from post-Fed lows, climbing back above 103.50 as risk sentiment deteriorated. Fed officials' recent comments suggest a cautious approach to additional cuts, citing persistent inflation concerns and resilient labor market data. Technical indicators show the dollar testing resistance at 104.00, with support established at 103.20. Currency pairs like EUR/USD and GBP/USD have retreated from recent highs, declining 0.5% and 0.6% respectively. Traders are now focusing on upcoming US economic data, particularly inflation metrics and employment figures, which could determine the Fed's next policy moves and dollar trajectory.