The Fed asks the market not to read too much into noise, but it's generating plenty of its own. Chair Kevin Warsh has been conspicuously quiet, while his colleagues have given nearly six dozen speeches, far more than a year ago. EUR/USD is listening to that choir of voices and holding near a 17-month low.

The October 27–28 FOMC meeting is expected to end with the federal funds rate unchanged at 3.75–4.00%, despite hotter-than-expected September price data. After a unanimous vote to hike last month, Warsh will have to explain a pause. The market currently prices in less than a 10% chance of a hike now but still puts odds on a move in December.

Market odds for Fed policy

There is no complete unity. Three regional Fed presidents previously dissented on a July pause and could vote against a pause in October.

Many Fed officials still describe the current stance as "restrictive," noting the median estimate of a neutral policy rate was 3.2% in September versus an actual 3.75–4.00%. But growth remains solid, equities hover near record highs, and companies such as Anthropic are raising multibillion-dollar sums. That picture does not look like an economy fully constrained by high rates, implying that the Fed retains room to tighten further.

Actual vs. neutral Fed rate dynamics

The inflationary impulse from massive AI investment and an energy shock tied to the Iran conflict has increased the odds of further rate hikes over the coming months.

JP Morgan sees bullish dollar risk around the Fed decision because the statement's tone could prove firmer than prices currently assume.

Danske expects a hold at this meeting, allows for two-three dissenters, and forecasts gradual 25-bp hikes in December 2026 and March 2027. Danske sees EUR/USD edge higher immediately after the decision but expects the pair to weaken toward 1.10 over a 6–12 month horizon.

Morgan Stanley also expects a hold at 3.75–4.00% with two dissenters, noting that three or more hawkish dissents or an overtly hawkish signal would strengthen the dollar. They argue that persistent US inflation and political uncertainty in Europe will keep the greenback supported and EUR/USD under pressure regardless of the meeting's outcome.

It's amusing to watch the central bank asking for calm while not being able to provide it.

Technically, the daily chart shows that EUR/USD is attempting to reestablish an uptrend. For bears, a decisive push below 1.111 would open the door to adding short positions that began near 1.118. If that fails, a double-bottom pattern could play out and open the way for fresh long entries.