Dollar surges as Fed turns hawkish, tariff headlines dominate. Powell signals steady hand, USD/SGD eyes 1.3000. Aussie pressured as CPI gives RBA “green light” to cut.
Written by Steven Dooley, Head of Market Insights, and Shier Lee Lim, Lead FX and Macro Strategist
Dollar surges as Fed turns hawkish, tariff headlines dominate
The greenback rallied strongly after the FOMC delivered a hawkish surprise, with Chair Powell emphasizing the Fed’s commitment to fighting inflation over labor market concerns.
The USD index approached 100.00 during Powell’s press conference, closing near 99.90 as markets removed 10bps of rate cuts from 2025 expectations.
The EUR/USD was the main loser, falling to 1.1400 by the close as front-end Treasuries sold off 7bps and yield curves bear flattened.
The USD/JPY topped out near 149.50, with further upside possible if yields continue rising ahead of today’s BoJ meeting.
The CNH remained under pressure above 7.2100 after Trump’s comments also targeted China as “Russia’s largest buyer of energy”, though his meeting with Treasury Secretary Bessent on US/China trade reportedly “went well”.
The CAD weakened to 1.3830 after the BoC left rates unchanged but hinted at more cuts ahead, citing greater downside risks from weaker growth than upside risks from tariffs.
Powell signals steady hand, USD/SGD eyes 1.3000
Federal Reserve Chair Jerome Powell said current interest rates are well-positioned to handle lingering uncertainty over tariffs and inflation, dialing down hopes for a September rate cut.
“There are many, many uncertainties left to resolve,” Powell told reporters Wednesday, after the central bank held rates steady. “It doesn’t feel like we are very close to the end of that process.”
The Federal Open Market Committee voted 9-2 to keep its key interest rate steady at 4.25% to 4.5%, extending this year’s hold streak.
In a pre-Fed comment, President Trump said he “hears” rates will be lowered in September.
USD/SGD is flirting with key resistance at 1.2979, the 100-day EMA. As we’ve noted numerous times before, dollar buyers may have taken advantage earlier. Next key psychological resistance: the psychological barrier at 1.3000.
Aussie pressured as CPI gives RBA “green light” to cut
The Australian dollar initially eased lower on Wednesday after key inflation readings fell by more than expected – setting up a potential Reserve Bank of Australia rate cut next month.
The closely watched June-quarter consumer price index (CPI) reading saw the headline annualised number fall from 2.4% last quarter to 2.1%, while the trimmed mean measure fell from 2.9% to 2.7%.
The monthly CPI reading fell from 2.1% to 1.9% – below the RBA’s 2-3% target band for the first time since March 2021.
Financial markets now see a 98% chance of a cut on 12 August. That said, financial markets got it wrong at the last meeting, when the RBA surprised markets and disappointed mortgage holders by holding rates steady.
For now, the AUD/USD has slipped into a short-term down trend, and has broken 100-day EMA support of 0.6460. Next key support is at 0.6400 key psychological handle.
Antipodeans slip on Fed rate hold
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 28 July – 2 August
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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
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