Traders are lowering their expectations regarding how much the Federal Reserve will cut interest rates in the coming months, illustrating how mixed signals from central bank officials are clouding the outlook for monetary policy.

In the futures market, the scenario implying just one 25-basis-point rate cut in 2025 and the so-called neutral rate — the optimal rate at which policy neither stimulates nor restrains growth — is now expected to be only partially realized. This stands in sharp contrast with last week, when bets on a 50-basis-point cut by year-end were in demand.

A wider range of views on monetary policy expressed by Fed officials in recent days contributed to this shift: traders rushed to hedge both the risk of the central bank delivering significant rate cuts and the risk of it acting less aggressively.

For example, newly appointed member Steven Miran stated that policy remains too restrictive and advocated for a 125-basis-point rate cut across the two remaining FOMC meetings in 2025, while Atlanta Fed President Raphael Bostic said the Fed must stay vigilant over inflation risks.

Meanwhile, Fed Chair Jerome Powell last week indicated that the outlook for the labor market and inflation is subject to risks and gave no hints as to whether he would support a rate cut at the next Fed meeting in October.

Recall that during its September meeting, the FOMC cut the federal funds rate for the first time this year, to 4–4.25%.

Currently, interest-rate swaps are pricing the neutral rate at about 2.95% and a total of roughly 40 basis points in rate cuts across the two remaining scheduled meetings this year.

News of the U.S. government shutdown could significantly affect the Fed's future outlook and its plans for further rate cuts. Without new data, which will not be published during the shutdown, it is unlikely that the Committee will proceed with a cut at the October meeting. However, there is always a chance that Republicans and Democrats will reach an agreement on spending, allowing the government to reopen and the release of fresh statistics that influence central bank decisions to resume.

As for the current technical picture of EUR/USD, buyers now need to focus on reclaiming the 1.1770 level. Only this will allow for a test of 1.1795. From there, the pair may climb to 1.1820, though doing so without support from large players will be quite difficult. The furthest target is the 1.1845 high. In case of a decline, I expect significant buying activity only around 1.1730. If no major buyers appear there, it would be better to wait for a renewal of the 1.1710 low or consider opening long positions from 1.1680.

As for the current technical picture of GBP/USD, pound buyers need to take the nearest resistance at 1.3490. Only then will they be able to aim for 1.3530, above which it will be rather difficult to break. The furthest target is the 1.3565 level. In case of a decline, bears will attempt to seize control at 1.3440. If successful, a breakout of this range would deal a serious blow to the bulls' positions and push GBP/USD down to the 1.3400 low, with the prospect of reaching 1.3365.