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USD Surges as Fed Signals Extended Rate Pause Through Q3 2026

USDFedEUR/USDinterest-rates
USD Surges as Fed Signals Extended Rate Pause Through Q3 2026

The US Dollar Index (DXY) surged 0.8% on Wednesday, its largest single-day gain in three weeks, after Federal Reserve Chair Jerome Powell signaled that interest rates would remain unchanged through at least the third quarter of 2026.

Key Takeaways

  • EUR/USD dropped to 1.0685, breaking key support at 1.0720
  • GBP/USD fell to 1.2540, losing 65 pips in the session
  • USD/JPY climbed to 157.80, approaching the intervention zone
  • US 10-year yields rose to 4.52%

What the Fed Said

"The Committee sees no urgency to adjust policy given the resilience of the labor market and sticky inflation in services sectors." — Jerome Powell, FOMC Press Conference

Markets had previously priced in a 35% chance of a rate cut by September. That probability has now dropped to just 12%, according to CME FedWatch.

Impact on Major Pairs

PairChangeKey Level
EUR/USD-0.72%Support: 1.0650
GBP/USD-0.51%Support: 1.2500
USD/JPY+0.65%Resistance: 158.00
AUD/USD-0.83%Support: 0.6420

What's Next

Traders should watch Friday's Non-Farm Payrolls report. A strong number would further cement the "higher for longer" narrative, potentially pushing DXY above 106.00. Conversely, a weak report could trigger profit-taking on USD longs.

Key resistance for DXY sits at 105.80 (April high), with support at 104.50 (50-day MA).