Global Markets React to Fed Rate Cut and Outlook

The euro fell against the U.S. dollar on Wednesday after the Federal Reserve delivered a widely expected 25-basis-point (bps) rate cut, but paired it with guidance suggesting further measured easing ahead. Despite trimming rates, the central bank struck a cautious tone, which markets interpreted as a “hawkish cut.”

The Fed acknowledged growing downside risks to the labor market, noting that unemployment has inched higher even as overall conditions remain historically tight. Inflation, meanwhile, was described as “somewhat elevated,” with the Fed pointing to upward pressures in the first half of 2025 alongside slower economic growth.

Fed Chair Jerome Powell downplayed speculation of an aggressive 50 bps cut, stating there was “no widespread support” for such a move. He emphasized that policy is “well positioned” to respond to changing conditions but stressed that the Fed is not rushing to lower rates further.

Across the Atlantic, the European Central Bank (ECB) kept rates unchanged, with officials signaling that the easing cycle has effectively ended. Softer Eurozone inflation data supported the decision: the Harmonized Index of Consumer Prices (HICP) slowed to 2% year-on-year in August, down from 2.1%, while core inflation held steady at 2.3%.

Recent U.S. data painted a mixed picture of economic momentum. Housing Starts plunged 8.5% month-on-month in August, their sharpest drop since May, while Building Permits fell 3.7%.

On the upside, Retail Sales surprised to the upside, climbing 0.6% MoM versus expectations of 0.2%, with the GDP-linked control group up 0.7%.

Bitcoin is trading on the upside early on Thursday, while broader cryptocurrency markets gained ground after the U.S. Federal Reserve delivered a 25-basis-point rate cut and signaled further easing ahead. The move was broadly in line with expectations, though optimism was tempered by caution over the Fed’s economic outlook and lingering concerns over corporate crypto holdings.

Lower rates generally support speculative assets, including cryptocurrencies, by improving liquidity. The sector’s 2021 bull run was fueled in part by near-zero global interest rates following the pandemic.

Adding to positive sentiment, the U.S. Securities and Exchange Commission (SEC) approved new listing standards for exchange-traded products tied to cryptocurrencies and spot commodities.

The rule change streamlines the approval process by removing the requirement for individual, case-by-case reviews. Under the new standards, eligible spot crypto ETFs can launch within 75 days of filing, significantly cutting red tape.

The first funds under this framework are expected to track assets such as Solana and XRP, with the decision paving the way for a broader wave of crypto ETFs.

While the Fed’s rate cut and the SEC’s ETF decision offer near-term support for digital assets, traders remain wary. Uncertainty over U.S. economic resilience and inflation trends, alongside persistent skepticism about corporate adoption of crypto, could keep a lid on further gains in the short term.

Oil prices fell on Wednesday, pressured by a surprise build in U.S. distillate inventories that renewed concerns over fuel demand, even as crude stocks declined sharply. The Federal Reserve’s widely anticipated rate cut also weighed on sentiment, with markets wary of the broader economic outlook.

Weekly data from the Energy Information Administration (EIA) showed U.S. crude inventories dropped significantly last week, driven by higher exports and reduced imports. However, the report also revealed a notable increase in diesel and heating oil stockpiles, raising fresh questions about demand resilience.

On the supply side, Kazakhstan resumed shipments through the Baku-Tbilisi-Ceyhan pipeline on September 13, following last month’s suspension due to contamination. In Nigeria, President Bola Tinubu lifted a six-month emergency rule in Rivers state, a key hub for crude exports, potentially supporting output.

Meanwhile, Russian supply risks remain a concern after intensified Ukrainian drone strikes on export ports and refineries. Russia’s state pipeline operator Transneft has warned producers they may be forced to curb output if the attacks persist, according to industry sources.

Oil markets remain caught between bullish supply-side risks and bearish demand signals. While geopolitical tensions and disruptions in Russia and Africa could tighten supplies, rising distillate stockpiles and uncertain demand outlooks are keeping prices under pressure.

The US 500 ended on Wednesday near record highs after the Federal Reserve delivered its first rate cut in nine months and signaled the likelihood of two further reductions this year. The move, which largely aligned with market expectations, kept U.S. indexes steady but did not spark a broader rally.

The Fed cut rates by 25 basis points and now projects two more reductions this year, up from one previously, though support for a third cut is weak. Inflation and unemployment forecasts for 2025 were left unchanged.

A recent University of Michigan survey showed sentiment ticking lower, with new trade levies weighing on household outlooks.

Elsewhere, Apple reported a 6% drop in smartphone sales in China ahead of the iPhone 17 launch, a steeper-than-usual slowdown before a flagship release, according to Counterpoint Research. Lyft surged after unveiling a partnership with Waymo to roll out autonomous ride-hailing services in Nashville by 2026, while rival Uber slipped.

In China, Baidu shares jumped on optimism around its AI chip initiatives, with investors increasingly confident in the company’s role in Beijing’s push for semiconductor independence.