**U.S. Dollar Retreats After Bessent Urges Fed Rate Cuts: Detailed Analysis for EUR/USD, GBP/USD, USD/CAD, USD/JPY**
*Based on original reporting by James Hyerczyk for FXEmpire*
The U.S. dollar faced a notable decline on Thursday as traders reacted to comments from Kingdon Capital founder Mark Bessent, who asserted that the Federal Reserve should begin cutting interest rates. Market sentiment quickly shifted in response, pushing major currency pairs into new territory as expectations of imminent policy easing gained traction. Below, we analyze the latest technical and fundamental outlook for the headline pairs: EUR/USD, GBP/USD, USD/CAD, and USD/JPY, within the context of shifting Fed expectations and global economic uncertainty.
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**Backdrop: Fed Caught Between Inflation and Growth**
The Federal Reserve’s messaging has grown increasingly nuanced in recent weeks. While inflation data has moderated, the pace remains slightly above the Fed’s 2 percent target, keeping policymakers cautious about loosening too early. However, as economic growth softens and labor market cracks begin to emerge, a growing chorus of Wall Street voices—including Mark Bessent—has called for rate cuts to avoid unnecessary economic pain.
Bessent’s comments, alongside dovish signals from members like Raphael Bostic and Austan Goolsbee, have spurred investors to pencil in possible cuts as soon as September. This changing landscape has driven significant volatility in the U.S. dollar, as seen through the lens of its major cross-rates.
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**EUR/USD: Bulls Capitalize on Dollar Vulnerability**
EUR/USD rallied robustly in Thursday’s session, accelerating above 1.0900 and threatening to break recent resistance levels. The pair’s upside was driven by a combination of softer U.S. economic data, echoes of dovish rhetoric from Federal Reserve officials, and improving sentiment in the Eurozone.
Key factors influencing EUR/USD include:
– **Fed Policy Bets:** Markets have priced in over 60% odds of a September rate cut, diminishing the greenback’s yield advantage.
– **Eurozone Stabilization:** Recent PMI data suggests the Eurozone economy may be bottoming out, especially in services, providing some backing for the euro.
– **Technical Picture:**
– Immediate resistance stands at 1.0940, the late-May high.
– A break above this could pave the way toward the psychological 1.1000 level—a critical battleground for bulls and bears.
– Support is now seen at 1.0880 and further at 1.0850.
**Short-Term Outlook:**
With market focus locked on both upcoming U.S. inflation metrics and continued Eurozone recovery signals, EUR/USD retains an undercurrent of bullish bias. The euro could extend gains if dovish Fed commentary persists and U.S. data continues to disappoint.
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**GBP/USD: Sterling Strength on Hawkish Bank of England and Soft Dollar**
The British pound extended its recent advance, with GBP/USD surging past 1.2800, as traders favored sterling amid growing uncertainty surrounding both Federal Reserve and Bank of England policy paths.
Drivers behind the pound’s resilience:
– **Diverging Central Bank Policies:**
– While the BoE is considering rate cuts, recent comments from Governor Andrew Bailey have emphasized data dependency, leaving open the prospect of rates staying higher for longer if inflation proves sticky.
– The U.S. rate cut narrative, meanwhile, has gained momentum due to softer job and spending data.
– **U.K. Economic Data:**
– Flash PMIs and robust retail numbers suggest the U.K. economy is on firmer footing than many had anticipated.
– **Technical Landscape:**
– Key resistance sits at 1.2860. Clearing this level would target 1.2900 next, a major psychological level.
– Immediate support lies at 1.2760, followed by 1.2720.
**Short-Term Outlook
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