The euro and the pound remain range-bound ahead of a key meeting of the U.S. Federal Reserve, where officials are expected to leave interest rates unchanged as they await clarity on the Trump administration's trade policy. This move is likely to disappoint the president and those seeking clear answers about the next steps of the U.S. central bank.

The aggressive tariff policy on imported goods is undermining consumer confidence, and households are preparing for a potential surge in consumer prices and weakening labor market conditions. However, recent data show that inflation slowed in March, and the unemployment rate remained unchanged in April. At the same time, U.S. GDP declined in the first quarter of this year following strong growth in Q4 2024.

Fed officials have recently emphasized in public remarks that despite an unusually high level of uncertainty, monetary policy remains in a good place, allowing them to confidently pursue their dual mandate of maximum employment and stable prices.

I expect we'll also hear that uncertainty in this environment remains high, and the Fed is ready to act—or not—as needed to fulfill both sides of its mandate.

The Fed's interest rate decision will be announced this evening. Afterward, Chairman Jerome Powell will hold a press conference. Investors will closely watch to see if Powell repeats, as he has many times before, that policymakers are "in no hurry" to adjust rates.

Futures markets currently price in a quarter-point rate cut at the July 29–30 Fed meeting and two or three more by year-end. Economists are expecting only two cuts starting in September.

In the post-meeting statement, officials are likely to keep the benchmark rate in the 4.25%–4.5% range and reiterate their March 19 statement language, noting that they remain attentive to the risks on both sides of their dual mandate. Some minor changes might appear in the first paragraph of the statement, which describes economic conditions. As I noted above, the GDP contraction in Q1—driven by imports—won't allow the committee to repeat that overall economic activity continued to expand at a solid pace.

Powell is expected to push back against rate cuts. However, officials like Richmond Fed President Thomas Barkin and Fed Governor Adriana Kugler have recently voiced concerns that inflation expectations could weaken. Yet with solid April wage growth, the reasons to cut rates diminish. Fed officials may again rely on signs of labor market strength to justify a wait-and-see stance, as April hiring exceeded payroll expectations and unemployment held around 4.2%. Policymakers will likely also repeat that uncertainty surrounding their economic outlook has increased or remains elevated.

It's hard to predict how the market will react to all this. But most likely, if Powell's comments lean dovish, the dollar will find support.

As for the current EUR/USD technical picture, buyers now need to target the 1.1379 level. Only a break above it would allow a push toward 1.1415. From there, the pair could reach 1.1453, though doing so without support from large players may be difficult. The ultimate target would be the 1.1487 high. If the pair declines, I expect significant buying activity only around the 1.1341 level. If there's no interest there, it would be wise to wait for a test of the 1.1305 low or open long positions from 1.1269.

Regarding the GBP/USD technical picture, pound buyers need to reclaim the nearest resistance at 1.3365. Only then can the pair aim for 1.3399, above which a breakout would be rather difficult. The final target would be the 1.3437 level. If the pair falls, bears will try to regain control over 1.3335. If successful, a break of this range would deliver a major blow to the bulls and push GBP/USD toward the 1.3301 low, with potential to extend the move to 1.3260.