It is anticipated that following a two-day policy meeting, the Federal Reserve will implement a second consecutive rate cut to prop up the unstable labor market. However, any attempts to extend the monetary easing cycle beyond October may encounter new resistance from a group of officials who remain concerned about inflation.

The absence of economic data over the past month due to the government shutdown creates an ambiguous picture. On the one hand, previous indicators do not show a significant slowdown in GDP growth. On the other hand, there is a noticeable decline in employment indicators, suggesting the need for stimulus measures. Inflationary pressure, while moderate, is still present, and any further rate cuts could exacerbate these pressures, undermining price stability and trust in the central bank.

The division of views within the Federal Open Market Committee adds to the uncertainty surrounding future monetary policy. Doves, leaning towards a softer policy approach, argue that the risks of increasing labor market problems already outweigh the risks of inflation, and that active support for the economy is necessary, even if it leads to some inflation acceleration. Hawks, conversely, believe that inflation poses a more serious threat that must be contained, even if it results in slower economic growth and rising unemployment.

Fresh consumer price data released last Friday showed that core inflation in the US grew at its slowest pace in three months in September. This could become a decisive factor for the Fed's plans to cut interest rates, maintaining the trend towards easing monetary policy at the end of this year.

This year, policymakers have remained on hold, waiting for an assessment of the impact of tariffs and other economic challenges. After a sharp slowdown in hiring this summer, officials decided in September to lower the key rate by a quarter percentage point. They also forecast two more rate cuts by the end of the year. Speaking earlier this month, Fed Chairman Jerome Powell noted that the labor market has indeed softened significantly and indicated considerable risks of further declines.

As a result, futures markets are nearly fully pricing in a quarter-point rate cut following tomorrow's meeting, with another quarter-point cut expected in December.

Although Trump's tariff policy has not yet led to the anticipated rise in inflation, regular announcements of new trade restrictions and tariffs raise concerns that their impact may be more prolonged. Moreover, there is evidence of rising price pressures in categories of goods not directly affected by tariffs.

Several Fed officials have also noted that inflation has exceeded the Fed's 2% target for more than four years, and they do not expect to reach the target until 2028. Such an extended period above the target increases the risk that long-term inflation expectations could escalate significantly, which would genuinely alarm policymakers.

In any case, expectations of a dovish Fed are already putting pressure on the dollar.

Regarding the current technical picture of the EUR/USD pair, buyers need to focus on reclaiming the 1.1675 level. Only then will they be able to aim for a test of 1.1700. From there, the next target will be 1.1725, but achieving this without support from major players will be quite challenging. The most extended target will be the high of 1.1755. If the trading instrument declines to around 1.1645, I expect significant actions from major buyers. If no one is present there, it would be advisable to wait for a renewal of the minimum at 1.1620 or to open long positions from 1.1580.

As for the current technical picture of GBP/USD, pound buyers need to secure the nearest resistance at 1.3365. This is the only way to target 1.3400; breaking above that level will be quite challenging. The most extended target will be the area of 1.3435. If the pair declines, bears will attempt to take control at 1.3345. If they succeed, breaking through this range will deal a serious blow to the bulls and push GBP/USD down to a minimum of 1.3320, with a prospect of dropping to 1.3285.