Fed Pivot Puts Brakes on December Rate Cut Bets

Dollar surged +0.65% to a 2-week peak as December rate cut odds cratered from 70% to just 28%. Here’s what flipped the script:

The Hawkish Shock: October FOMC minutes dropped a bomb—“many” officials want rates frozen through year-end. BLS nuked the Oct jobs report too, stripping away the last data point before December’s meeting. Game changer.

Dollar Bull Mode: Stronger greenback also crushed the yen to a 9.75-month low after a Japanese official signaled the BOJ won’t hike before March. Japan’s throwing 20 trillion yen stimulus at the wall, torching yen demand. Trade data helped too—Aug deficit shrank to -$59.6B vs forecast -$60.4B.

The Ripple Effects:

• EUR/USD dumped -0.46%, hitting 1.5-week lows
• USD/JPY popped +0.95%
• Gold/silver bounced +0.40%/+0.66% but still dragging from dollar strength

Real Talk: Rate cut expectations are basically dead in December now. PBOC just posted 74M oz of gold reserves (12th straight month of buying), and global central banks gobbled 220 MT in Q3—up 28% QoQ. But precious metals are fighting the stronger dollar and fading safe-haven demand.

Mortgage apps fell -5.2% week-over-week. 30-year rates ticked up to 6.37%. Market’s pricing in a mere 10% chance of a BOJ hike on Dec 19.