Fed Dove Talk Lifts Dollar, But Rate Cut Bets Dominate Market

The dollar index is inching higher (+0.06%) today, riding on yen weakness as traders digest mixed signals from the Fed.

The Key Driver: Rate Cut Pressure

Fed Governor Christopher Waller threw a curveball yesterday, signaling he’d support a December rate cut. Market pricing now shows a 70% probability the FOMC cuts by 25bp at the December 9-10 meeting. That dovish tone is actually capping dollar gains—usually rate cut bets weaken the greenback.

Currency Moves Breaking Down:

USD/JPY is up +0.38% as the yen takes a hit from Japan’s fresh 17.7 trillion yen stimulus package (bigger than last year’s). The yen’s still nursing last Friday’s 10-month low, but T-note yields are stabilizing it a bit. Market sees only 23% odds of a BOJ rate hike on December 19.

EUR/USD edged up +0.08%. The euro got a boost from NATO’s optimistic Ukraine peace talk signals—Russia’s running out of battlefield momentum and soldiers. But German IFO business confidence just tanked unexpectedly (-0.4 to 88.1), putting a lid on upside. ECB rate cut odds remain minimal at 2%.

Gold & Silver Bounce Back

Precious metals recovered from early dips: gold up +0.21%, silver +0.19%. Waller’s rate-cut comments reignited demand as a value hedge. The real tailwind? Central banks won’t stop buying—China’s PBOC reserves hit 74.09M troy oz in October (12 straight months of increases), and global central banks grabbed 220 MT in Q3 (+28% QoQ).

That said, stock rally strength and improving Ukraine peace outlook are trimming safe-haven demand. ETF holdings in both metals have cooled after hitting 3-year peaks on October 21.