**AUD/USD Plunges After Federal Reserve Policy Announcement: Market Eyes on Powell’s Remarks**
*Adapted from the original article by Rakesh Upadhyay at FXStreet, with supplementary analysis.*
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### Overview
The Australian Dollar (AUD) experienced significant losses against the US Dollar (USD) following the latest Federal Reserve policy update. After a period of relative stability, the AUD/USD pair slid sharply as the US central bank kept its interest rates unchanged, signaling a prolonged higher rates environment. Market participants are now closely watching Federal Reserve Chair Jerome Powell’s subsequent commentary, which may influence expectations for upcoming monetary policy moves.
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### Federal Reserve Policy Decision: Key Points
On July 31, 2025, the US Federal Reserve concluded its two-day policy meeting with several pivotal decisions:
– **Interest Rate Stays on Hold**: The federal funds rate was maintained within its target range of 5.25% to 5.50%.
– **Policy Statement Unchanged**: The overall tone and language in the policy statement were largely consistent with previous communications, reflecting ongoing uncertainty about the timing of any future rate cuts.
– **Emphasis on Data Dependence**: The committee reiterated it would continue to monitor economic and financial developments and that decisions about the target range would be data-dependent.
The Fed’s decision to keep rates steady reflects ongoing efforts to balance inflation concerns against risks to economic growth. Inflation has moderated from its highs, but remains above the Fed’s 2% target, prompting policymakers to communicate patience before adjusting rates.
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### Market Reactions: AUD/USD Performance
Immediately following the Fed’s announcement:
– **The US Dollar rallied**, reflecting increased demand as investors sought safety and higher yields.
– **AUD/USD saw a sharp decline**, breaking below key technical support levels.
– By the end of the New York session on July 31, AUD/USD had fallen from highs of 0.6730 to trade near 0.6640, marking its weakest level in several weeks.
This move was underpinned by shifting expectations about the relative interest rate dynamics between the US and Australia.
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### Powell in the Spotlight: Anticipating Forward Guidance
Federal Reserve Chair Jerome Powell’s press conference was a focal point, as market participants sought further cues on how long the Fed might keep interest rates elevated.
– **Powell’s Tone**: In prepared remarks, Powell acknowledged recent progress on inflation but stressed that the Fed needs “greater confidence” before moving toward rate cuts.
– **Emphasis on Patience**: Powell repeatedly noted that inflation remains above the Fed’s 2% target and that the central bank would require “sustained evidence” of moderating inflation before taking action.
– **Soft Landing Concerns**: Powell reiterated that a recession is not the Fed’s base case but acknowledged risks to both sides of the economic outlook.
Market reactions suggest investors now believe the Fed will maintain its cautious, data-driven stance, reducing speculation of imminent rate cuts.
Read more on AUD/USD trading.