USDInd hits two-year high after Fed rate decision

• Dollar index hit highest level since Nov 2022
   
• Fed cut rates by 25 basis points, hawkish outlook
   
• 2025 projections: 2 rate cuts
   
• 91% chance Fed holds rates steady in January
   
• BoE likely to maintain 4.75% rate amid sticky inflation

The dollar index is hovering near 108 on Thursday, maintaining its strength after climbing over 1% the day before, marking its highest point since November 2022.

This surge came on the heels of the Federal Reserve’s widely expected 25 basis point rate cut on Wednesday.
 

However, the central bank surprised markets by projecting fewer rate reductions for 2025 than previously anticipated.

The Fed now expects only two rate cuts next year, a notable drop from the four initially predicted in its September estimates. Furthermore, the Fed updated its economic forecasts for 2025, revising GDP growth and inflation projections upward while lowering its unemployment rate outlook.

 Fed’s revised projections for 2025:

• Interest rate: 3.9% vs 3.4% before
• Inflation: 2.5% vs 2.1% before
• GDP: 2.1% vs 2.0% before

Consequently, market participants now assign a 91% likelihood that the Fed will leave interest rates steady in January. (source: CME FedWatch Tool).

Investors are now shifting their attention towards to the upcoming monetary policy announcement from the Bank of England due 12:00 PM UTC.
 

BoE is widely expected to hold the interest rates intact at 4.75% amid sticky inflation.

According to Bloomberg, the GBPUSD potential 7-day trading range falls within the 1.2494 – 1.2764 (74.0% probability).