Fed's Rate-Cut Odds Plummet: What It Means for Your Portfolio

The dollar just had its best day in 2 weeks, and here’s why traders should care.

The Big Picture

Dollar index jumped +0.65% on Wednesday after the Fed released surprisingly hawkish meeting minutes. The key takeaway? “Many” FOMC officials now think rates should stay put through the end of 2025. That’s a massive shift—December rate-cut odds have nosedived from 70% last week to just 28% now.

What triggered the reversal: The BLS unexpectedly canceled publication of the October employment report, removing crucial data ahead of the December 9-10 FOMC meeting. Fewer data points = less ammunition for the rate-cut crowd.

Currency Wars Heating Up

The yen got absolutely hammered, sliding to a 10-month low after a Japanese PM advisor signaled the BOJ won’t hike before March. Worse, Japan’s reportedly planning a 20 trillion yen ($129B) stimulus package—essentially admitting they’re choosing stimulus over rate hikes. That’s dovish currency pressure waiting to explode.

EUR/USD tumbled -0.46% as euro weakness followed dollar strength, though divergence between the ECB (rate-cut cycle largely done) and a “on-hold” Fed is providing some floor.

Precious Metals Caught in the Crossfire

Gold (+0.40%) and silver (+0.66%) tried to bounce back after brutal losses last week, but the stronger dollar and fading December cut hopes are acting as a headwind. That said, central banks aren’t quitting—China’s PBOC just hit 74.09 million oz in reserves (12th consecutive monthly increase), and global central banks bought 220 MT in Q3, up 28% from Q2.

The Numbers That Matter

• US Aug trade deficit: -$59.6B (better than -$60.4B expected)
• 30-year mortgage rate: 6.37% (up 3 bp)
• MBA mortgage apps: -5.2% week-over-week
• BOJ rate hike odds in December: Just 10%

Bottom Line: The narrative has flipped from “soft landing = rate cuts” to “Fed holds steady = stronger dollar.” Macro traders reshuffling positions accordingly.