The Federal Reserve did not explicitly state that it would end its interest rate hike cycle. However, dollar traders need to pay attention to several crucial changes.

The US dollar index (DXY) fell to a low of 101.06 between Wednesday and early Thursday (May 3rd). The Federal Reserve raised interest rates by 25 basis points, per market expectations. However, they also signaled that this is the last hike in the post-pandemic monetary tightening cycle.

dxyDXY Daily chart via TradingView

The Federal Reserve did not explicitly state that they would end the cycle of interest rate hikes. However, changes in the Federal Reserve's stance were seen in several sentence revisions in its policy statement. They no longer "anticipate" further interest rate hikes but will monitor incoming data and consider "cumulative tight monetary policy" to determine "how far additional policy tightening may be necessary."

The Fed's statement signaled a pause in interest rate hikes, but its dovish stance was not too strong. Therefore, the US dollar only weakened slightly against significant currency pairs. Market participants will likely consider upcoming economic data to make their subsequent investment decisions, including Friday's Nonfarm Payroll (NFP) report.

"Some people may have expected an explicit pause (in the interest rate hike cycle). I think that's unrealistic, but this is essentially what a pause looks like," said Adam Button of ForexLive. "The game's name now is to watch economic data and try to find signals of weakness or strength in the US economy."

Despite the greenback's reaction, The Fed's decision was quite wise because some US inflation data has already begun to show a slowdown. Turmoil in the US banking system has also led to tighter credit conditions, which could lead to further economic slowdowns later this year. In addition, the rate hike pause will help The Fed "avoid" the political turmoil of the US debt ceiling, which is heating up ahead of next month's deadline.