The Federal Reserve lowered interest rates by 25 bps to 3.75%4.00%. Yet Chair Powell struck a hawkish tone, pushing back against market expectations of further cuts. U.S. Treasury yields rose +10bp along the curve, and the dollar strengthened, with the EUR/USD cross near 1.16. The market-implied probability of a December cut fell from 92% to 65%.
U.S. equities had a choppy session. The tech-heavy Nasdaq closed higher on news that President Trump would discuss China's use of Nvidia chips with Xi Jinping during this week's trade negotiations. Broader indices dipped following Chair Powell's remarks, only to regain strength by the end of the session, leaving the S&P 500 flat on the day.
Euro area financial markets had a quiet session ahead of the Fed's meeting. Sovereign yields edged lower, with peripheral risk premia slightly narrowing. Equities were mixed across the region, with gains in Spain and Portugal but weakness elsewhere.
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