Forex Market Outlook: EUR/USD Volatility Follows Fed Rate Cut – September 21, 2025

TradeWithCuthberth 

Here's an overview of the key events and trends affecting the Forex market as of Sunday, September 21, 2025:

Major currency pair performance

EUR/USD: The Euro to US Dollar exchange rate has experienced volatility, particularly after the Federal Reserve's recent interest rate cut. While the rate cut initially boosted the pair above 1.18500, it struggled to maintain momentum and dipped below 1.1750. The short-term outlook for the pair remains uncertain, with potential selling pressure before key US economic data releases, particularly concerning GDP and inflation.

GBP/EUR: The British Pound has continued its slide against the Euro, breaking below the 1.1470 level and reaching a 6-week low. This weakness is attributed to fiscal fears ahead of the upcoming UK budget and a decline in consumer confidence.

USD Strength: The US Dollar has shown a rebound against major currencies. This strength is supported by better-than-expected US economic data, including strong retail sales and lower unemployment claims. However, warnings about potential inflation could curb further gains.

Factors influencing the forex market

Central Bank Policies:

Federal Reserve: The Fed cut rates by 0.25%, which was widely anticipated. However, hints of a potentially tighter monetary policy in 2026 and concerns about inflation caused the US dollar to strengthen following the announcement.

Bank of Japan: The BoJ maintained interest rates as expected but saw two dissenting votes in favor of hikes, indicating a hawkish tilt that benefited the Japanese Yen.

Bank of England: The BoE also kept rates unchanged, and while there was a slight hawkish lean in the voting, it didn't provide a boost for the Pound.

Reserve Bank of Canada: The BoC cut rates by 0.25%, which was in line with market expectations.

Economic Data:

US Retail Sales: Increased by 0.6% month-on-month, exceeding expectations and positively impacting the US stock market.

UK CPI: Matched expectations, showing a high annualized rate of 3.8%.

Canadian CPI: Decreased by 0.1% month-on-month, slightly lower than anticipated.

US Unemployment Claims: Were lower than expected, contributing to positive US market sentiment.

New Zealand GDP: Contracted by 0.9%, worse than the expected 0.3% contraction, leading to a weakening of the New Zealand Dollar.

Geopolitical Events: Ongoing geopolitical tensions, particularly in the Middle East and involving Russian oil sanctions and airspace violations, are contributing to uncertainty in global markets.

Commodities: Crude oil remains in a bearish consolidation phase, trading within a three-year down-trending channel. A sustained breakout requires a clear hold above $64 per barrel. Meanwhile, central bank gold purchasing, totaling over 900 tonnes in 2025, is providing strong structural support for gold prices, which are testing resistance at $3545 per ounce.

Other notable news

The Naira continues to face pressure against the British Pound in Nigeria's parallel market, with the Pound trading significantly higher than the official rate.

The Central Bank of Nigeria (CBN) injected $150 million in FX intervention sales to support the Naira's rally.

A couple in Madurai was reportedly cheated out of ₹1.80 crore under the pretense of high returns from forex trading. This highlights the importance of caution and due diligence when engaging in forex trading, particularly given the risks associated with an unregulated market. The "90% rule" in Forex suggests that a large percentage of new traders lose money, underscoring the need for effective risk management and strategy.

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