25 September 2025

The Fed’s Rate Cut on September 17, 2025: Market Shockwaves and What Comes Next

Motasm Adel

A Bold Move: The Fed Lowers Rates

On 17 September 2025, the U.S. Federal Reserve announced a quarter-point reduction in its benchmark federal funds rate, lowering it from 4.25%–4.50% down to 4.00%–4.25%. This marked the Fed’s first rate cut since December 2024.

The rate cut came amidst signs of economic softening—slowing job gains, weakening workweek averages, and inflation that still hovers above target. In its policy statement, the Federal Open Market Committee (FOMC) signaled that additional cuts are on the table later in 2025, contingent on incoming economic data.

It’s worth noting that the vote to cut was not unanimous. One dissent came from Governor Stephen I. Miran, who argued for a more aggressive 50 basis-point cut instead of the 25 basis points that were approved.

Immediate Market Reaction

Gold: Meteoric Moves, New Records

Gold soared in response to the dovish monetary policy shift. Markets interpreted the rate cut as a loosening, reducing the opportunity cost of holding non-yielding assets like gold.

By 25 September 2025, the spot gold price had reached $3,741.19 per ounce, reflecting gains of roughly 0.13% for that session. Other sources place spot gold slightly higher—in the range of $3,758.96 per ounce.

Earlier that week, gold touched an all-time high around $3,790.82 per ounce. That level represented a psychological and technical barrier. The rally into new territory was fueled by dovish expectations, weaker real yields, and broader global risk appetite.

However, gold’s advance has not been entirely smooth. In the latest session, gold saw some pullback—spot gold slipped to around $3,731.62 (down ~0.86%) as the U.S. dollar found some footing.

In essence: gold benefited strongly from the rate cut, but faces short-term tightening forces if the dollar strengthens or expectations for future cuts wane.

U.S. Dollar (DXY & Index)

The U.S. dollar index (DXY) remains a key barometer. Coming into the rate cut, many expected the dollar to weaken as markets priced in easier policy ahead. But the actual reaction has been more mixed.

As of 25 September 2025, the dollar index is around 97.8 (some sources citing 97.87). Despite the cut, the dollar hasn’t decisively broken above 98, which many had viewed as a threshold.This suggests that while the dollar is under pressure, it still retains relative strength. The dollar’s resistance to collapse implies that many macro participants remain cautious about a one-sided steep decline.

Why Did Gold React So Strongly—and What Are the Risks?

Lower rate environment = lower real yields
When nominal rates fall and inflation remains sticky, real yields (nominal yield minus inflation) tend to decline. Gold, not offering yield, becomes more attractive in such environments.
Heightened expectations for further cuts
The Fed itself signaled additional rate cuts later this year, which fueled bullish sentiment in metals.
Safe-haven and hedge appeal
At times of uncertainty—geopolitical, inflationary pressures, or central bank crosswinds—gold often benefits from capital flows seeking alternatives.
Speculative momentum and technical breakouts
Once gold broke past key resistances, technical traders piled in, amplifying the move.

But the rally carries risks:

A rebound in the dollar, driven by stronger-than-expected U.S. data, could sap momentum.
If inflation remains sticky and the Fed’s next moves become more hawkish, rate cut expectations may be scaled back.
Profit-taking is likely once gold tests and fails resistance zones near $3,780–$3,835.

Outlook: Where Do We Go From Here?

Gold

Given the current landscape, gold’s path remains broadly bullish, but with caveats. Key levels to watch:

Support zones around $3,710, $3,660, even down to $3,600 if correction intensifies.
Resistance zones near $3,770, $3,800, and possibly toward $3,835 if the bullish momentum persists.
If further rate cuts materialize in October and December (as priced by markets), gold could press toward $4,000 in a sustained uptrend.

Yet, any signs of accelerating U.S. strength or hawkish shifts at the Fed could provoke pullbacks.

U.S. Dollar & Broader Currencies

The dollar’s future depends heavily on the balance between:

Fed forward guidance
U.S. macro data (inflation, employment, consumption)
Global risk flows and capital shifts

If the Fed remains dovish and weak data continues, the dollar index could slip below 97, opening a clearer downward trajectory. That scenario would strengthen gold further and amplify pressure on USD-based assets.

If, however, data surprises on the upside (strong jobs, inflation surprises), markets may revise expectations, and the dollar could claw back toward 98 or above.

Other Assets & Spillovers

U.S. equities tend to benefit from rate cuts, especially growth and tech sectors, but overextension and valuation concerns remain.
Commodities in general might see broader strength due to weaker dollar dynamics, though each commodity has its own drivers.
Emerging markets & currencies could rally, as capital looks for yield outside the U.S.

Conclusion

The Fed’s decision on 17 September 2025 to reduce rates by 25 basis points has rippled across markets—most notably, giving gold a powerful upward leg, while putting pressure on the dollar. By 25 September, gold prices are flirting with historic highs (around $3,740–$3,759 per ounce), and the dollar index remains under 98, signaling potential vulnerability. Yet, the dollar has shown resilience.

Moving forward, the evolving dance between monetary policy, macroeconomic surprises, and investor sentiment will be central. For traders and investors, staying nimble is key:

Watch key technical levels in gold and the dollar.
Monitor Fed public communications (minutes, speeches).
Digest incoming U.S. data sharply—especially inflation (PCE, CPI) and labor metrics.

If the Fed follows through with more cuts and the U.S. economy softens, gold may have much further to run. But if inflation surprises or economic resilience emerges, expect volatility—perhaps even a reversion.

By Motasm Adel
Market Researcher and Analyst

Risk Disclaimer: This information is for educational purposes only and does not constitute investment advice. Financial markets involve risks, and past performance is not indicative of future results. Always conduct your own research and seek professional advice before making investment decisions.