Australian dollar recovers despite disappointing employment data

Key Movers

The US Federal Reserve (Fed) announced a quarter percentage point reduction in its benchmark interest rate, marking the first rate cut since December. In addition to this move, the central bank signaled its intention to implement two more rate reductions before the end of the year, underscoring growing concerns about slowing economic growth and emerging risks to the labor market. The decision to lower the federal funds rate by 25 basis points was widely anticipated by markets, reflecting a shift in the Fed’s stance from tightening to a more accommodative monetary policy amid mounting uncertainties. Despite this, US President Donald Trump expressed dissatisfaction with the pace of cuts, publicly calling for a “bigger” reduction in interest rates to bolster economic growth and counteract global trade tensions. Fed Chair Jerome Powell explained the rationale behind the decision during the press conference, highlighting “growing signs of weakness” in the labor market and broader economic indicators that warranted a preemptive easing. After keeping rates steady since December in response to concerns over tariff-driven inflation and a historically strong labor market, the Fed is now pivoting to safeguard the expansion amid rising uncertainties, including ongoing trade disputes and slowing global demand. The Fed’s shift signals a cautious approach to supporting the economy, aiming to strike a balance between sustaining growth and managing inflation risks. Market participants will closely monitor upcoming data releases and the Fed’s communications for further guidance on the pace and extent of future monetary easing.