FOMC Policy Outlook and Technical Analysis for EUR/USD and GBP/USD

Economic Backdrop and FOMC Priorities

The recent Federal Open Market Committee (FOMC) meeting has highlighted a period of significant uncertainty for the U.S. economy. Key economic indicators reveal a sharp rise in inflation, which jumped from 2.4% to 3.3% in March, while first-quarter GDP growth settled at 2.0%. Despite signs of stabilization in the labor market, the Federal Reserve remains committed to its primary mandate of taming persistent price pressures.

Federal Reserve Leadership and Policy Stability

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Internal dynamics at the Federal Reserve suggest a continuation of current policy frameworks as Jerome Powell intends to remain on the FOMC until 2028. This long-term presence is expected to maintain the central bank's independence from political pressure regarding interest rate adjustments. Even with new leadership entering the central bank, Powell's measured approach toward maximum employment and price stability is likely to exert significant influence over future committee decisions.

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Monetary Policy and Market Sentiment

Market expectations for interest rate cuts in 2026 have largely dissipated, providing a neutral to supportive backdrop for the U.S. dollar. Data from the CME FedWatch tool suggests that the market is now pricing in a slight possibility of further tightening rather than monetary easing. However, because the prospect of a single rate hike before year-end remains speculative, the currency market's reaction to the latest FOMC outcomes has been relatively muted.

EUR/USD Technical Outlook

The EUR/USD pair continues to trade within an upward trend segment, though it is currently navigating a corrective structure. Technical analysis suggests that this corrective wave may be complete, provided there is no further escalation in geopolitical tensions. A lack of positive fundamental drivers or an improvement in global stability could see the pair transition into a new downward wave set from its current positions.

GBP/USD Technical Outlook

For GBP/USD, a clear three-wave upward structure has emerged on the charts, which may have reached its conclusion. Analysts anticipate the formation of a downward corrective wave targeting the 1.3400 level (the 34 figure) in the near term. The potential for the current trend to evolve into a five-wave upward sequence depends heavily on a de-escalation of regional conflicts, which remain a primary driver of market volatility.

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