Fed Hawkish Stance Pushes Dollar to 2-Week Peak, December Rate Cut Odds Collapse to 28%

The dollar surged Wednesday after the Fed’s October FOMC minutes revealed “many” officials want to hold rates steady through year-end. The DXY index climbed +0.65% to a 2-week high, driven by three major catalysts:

What Changed the Market

• BLS canceled October employment data publication, removing a key data point before December’s FOMC meeting—this alone crushed December rate cut odds from 70% to just 28%
• FOMC minutes signaled a more hawkish stance than expected
• US trade deficit shrank to -$59.6B (vs. -$78.2B in July), beating forecasts

Impact Across FX Markets EUR/USD fell -0.46% to a 1.5-week low as the stronger dollar weighed on euro. However, euro losses stayed contained—Trump-Russia Ukraine talks and ECB rate-cut cycle completion provided some support.

USD/JPY rallied +0.95% after a BOJ advisor signaled rates unlikely to rise before March, spooked markets with a potential 20 trillion yen ($129B) stimulus, sending yen to a 10-month low. One bright spot: Japan’s September core machine orders jumped +4.2% m/m (best in 6 months), and 10-year JGB yields hit a 17-year high at 1.781%.

Precious Metals Caught in Crossfire Gold (+0.40%) and silver (+0.66%) bounced back from last week’s losses but couldn’t sustain momentum as the dollar rally kicked in. Safe-haven demand remains steady—China’s PBOC added gold reserves for the 12th consecutive month (now 74.09M oz), and global central banks scooped up 220 MT in Q3 (+28% from Q2). But fading December rate-cut hopes weighed on prices.

The Takeaway The employment data cancel was the market’s “oh crap” moment. It basically told traders the Fed’s December meeting will lack crucial context, pushing officials toward a hold. Dollar bulls are running the show for now.