Yesterday, the U.S. dollar lost ground against major currencies after three Federal Reserve officials voiced concerns about the U.S. labor market, pointing to a possible interest rate cut in September. Investors who had anticipated a more aggressive approach to combating inflation were forced to revise their positions, resulting in weaker demand for the U.S. currency.

Particular attention was paid to Fed officials' comments regarding the slowdown in job growth and the rise in unemployment claims. Recent data suggest that the labor market is starting to come under pressure, which may require a more flexible policy from the central bank. A rate cut, in turn, is aimed at stimulating economic activity and supporting employment. However, it's important to note that a rate cut is not a foregone conclusion. The decision will depend on how key economic indicators evolve, especially inflation and employment. If inflation remains above target and the labor market proves resilient, the Fed may delay rate cuts or even resume tightening monetary policy.

San Francisco Fed President Mary Daly stated that policymakers will likely need to adjust interest rates in the coming months to prevent further deterioration in the labor market. "The labor market has softened. And I would consider further slowing undesirable," Daly said Wednesday in a speech prepared for an event in Anchorage, Alaska. "All of this means that we will likely need to adjust policy in the coming months."

Fed Governor Lisa Cook echoed similar concerns in Boston. The July jobs report, which included substantial downward revisions to the previous three months, raised alarms for her. According to Cook, such revisions are quite typical during turning points in the economy.

Minneapolis Fed President Neel Kashkari also expressed concern on Wednesday about signs of slowing reflected in several indicators. "The economy is slowing down," Kashkari said in an interview. "In the near future, we may need to adjust the federal funds rate," referring to the Fed's key interest rate. He added that he still expects the Fed to cut rates twice before the end of 2025.

Recall that data released last week pointed to a sharp slowdown in labor market activity in recent months. In July, employers added only 73,000 jobs—less than expected—and the previous two months' gains were revised down by nearly 260,000. The unemployment rate rose to 4.2% from 4.1% in June.

At the end of July, Fed officials left rates unchanged, and the next meeting is scheduled for September. After that, two more meetings will take place in 2025.

Technical Outlook for EUR/USD Buyers now need to focus on reclaiming the 1.1690 level. Only then will a test of 1.1730 become possible. From there, the pair could reach 1.1760, although doing so without support from major players may prove difficult. The furthest target remains the 1.1800 high. In case of a decline, I expect significant buying interest only around the 1.1655 level. If there's no activity there, it would be reasonable to wait for a retest of the 1.1610 low or to consider long positions from 1.1565.

Technical Outlook for GBP/USD Pound buyers need to reclaim the nearest resistance at 1.3380. Only then will they be able to target 1.3425, above which a breakout may be quite difficult. The furthest upward target is the 1.3450 level. In case of a pullback, the bears will try to regain control over the 1.3330 level. If successful, a break below that range would deal a significant blow to the bulls' positions and push GBP/USD down to the 1.3280 low, with the potential for an extension to 1.3250.