Fed Rate Cut Odds Crash to 28%: Why the Dollar Is Having Its Moment

The greenback just posted its best week in two, surging +0.65% on Wednesday as bets on a December rate cut basically evaporated.

Here’s what triggered the move:

The Fed Plot Twist

• The BLS dropped a bomb: canceled the October employment report before December’s FOMC meeting
• That single move tanked December cut odds from 70% to just 28%
• Fed minutes turned hawkish—“many” officials want rates parked for the rest of 2025
• Translation: No Santa rally for rate-cut bulls

The Data Came Hot

• US trade deficit narrowed to -$59.6B (vs. -$78.2B in July), beating expectations
• MBA mortgage applications fell -5.2% week-on-week
• 30-year fixed mortgage jumped to 6.37%

Currency Casualties

• EUR/USD dumped -0.46%, hitting 1.5-week lows as the dollar crushed it
• USD/JPY ripped +0.95%—yen got absolutely torched to a 10-month low
• Japanese officials basically said: stimulus incoming, rate hikes on pause until 2025
• BoJ decision odds? Only 10% for a hike at December 19 meeting

Precious Metals Under Pressure

• Gold closed +0.40%, silver +0.66%—recovery mode after heavy selling
• Central bank buying (China’s PBOC up to 74.09M ounces, 12 months straight) provides some cushion
• Global central banks grabbed 220MT in Q3 (+28% vs Q2)
• But bigger picture: fewer rate cuts = less gold tailwind

The Macro Backdrop Uncertainty around tariffs, geopolitical risks, and BoJ policy are keeping safe-haven demand alive. China’s debt stimulus could shift things. Watch the December FOMC closely—it’s becoming the pivot point the market can’t ignore.