On Wednesday, the U.S. dollar rebounded from a 14-month low against the euro in volatile trading. However, investors maintained expectations that the Federal Reserve will implement another significant interest rate cut at its November meeting, driven by weakening labor market sentiment. EURUSD declined by 0.42%, closing at 1.1133, while GBPUSD dropped 0.67%, ending at 1.3323. 

(EURUSD Daily Price Chart, Source: Trading View) 

(GBPUSD Daily Price Chart, Source: Trading View) 

The narrowing labor market differential, which reflects the balance of demand and supply in the employment sector, signaled troubling prospects for the U.S. economy. Markets have interpreted this as a strong indication that the Federal Reserve is highly likely to deliver a second emergency-sized cut at its November meeting. 

Last week, the Fed initiated a series of anticipated rate cuts with an unusually large half-percentage-point reduction. Fed Chair Jerome Powell emphasized that this move demonstrates policymakers’ commitment to maintaining low unemployment now that inflation pressures have eased. According to the CME Group’s FedWatch Tool, traders are now assigning a 59% probability of a 50-basis-point cut at the Fed’s November 7 meeting, up from 37% the previous week, and a 41% chance of a 25-basis-point cut. 

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