Dollar Outlook: Hawkish comments from the Fed push the dollar index toward 100.257
2025-11-01 01:25:38
On Friday (October 31), the US dollar index rose for the third consecutive trading day, reaching 99.844 in the afternoon session, approaching the high of 100.257 set on August 1. Cautious comments from policymakers reduced market expectations for another rate cut by the Federal Reserve this year, becoming the main driver of this rebound.
The Federal Reserve cut interest rates by 25 basis points on Wednesday, with Powell downplaying the certainty of a December rate cut.
The Federal Reserve cut its benchmark interest rate by 25 basis points on Wednesday to a range of 3.75%-4.00%, the lowest level in three years. Fed Chairman Jerome Powell subsequently told reporters that another rate cut in December was "far uncertain," noting that the ongoing US government shutdown was limiting access to key economic data needed for policy assessment.
Federal Reserve officials are divided on further easing.
Two Federal Reserve officials voted against this week's interest rate cut, highlighting growing policy disagreements within the central bank. Kansas City Fed President Jeffrey Schmid and Dallas Fed President Lorie Logan both opposed the rate cut, citing persistent inflationary pressures and resilient financial conditions.
Schmidt pointed out that the strong stock market, narrowing corporate bond spreads, and robust credit issuance all indicate that financial conditions remain accommodative. Logan added that future rate cuts would require "clear evidence" of a faster slowdown in inflation or a significant slowdown in the labor market.
The market has already reacted sharply to this. According to the CME Group's FedWatch Tool, the probability of another rate cut in December has fallen from 92% a week ago to 63%.
Treasury yields remained firm following the Federal Reserve's decision.
On Friday, the 10-year U.S. Treasury yield briefly touched 4.10% during the session before stabilizing around 4.089%. The 2-year Treasury yield fell to 3.594%, while the 30-year Treasury yield remained around 4.659%. The rebound in yields from previous lows below 4.00% highlights investor concerns about whether the Federal Reserve will continue its accommodative policy should no new data emerge showing weakening economic growth or inflation.
A stronger dollar puts pressure on major global currencies.
The US dollar outperformed other major currencies in global markets. The yen traded at 154.125 against the dollar, down 4% in October, its worst monthly performance since July, despite a 2.8% year-on-year increase in core inflation in Tokyo. The Bank of Japan's decision to keep interest rates unchanged provided little support for the yen.
The pound fell 0.2% against the dollar to 1.312, on track for a monthly decline of 2.3%, as investors awaited the upcoming budget announcement from Chancellor Rachel Reeves. The European Central Bank kept interest rates unchanged at 2% for the third consecutive meeting, reinforcing the dollar's yield advantage; the euro was flat against the dollar at 1.1562.
Market Outlook: The US dollar remains bullish in November.
(US Dollar Index, source: FX678)
Hawkish comments from the Federal Reserve, strong Treasury yields, and interest rate differentials with other major economies continue to support a stronger dollar. A sustained break above 100.257 in the dollar index could attract further buying momentum.
The US dollar is expected to remain bullish in November, influenced by the US government shutdown which limited data releases and cooled expectations for further easing.
The Federal Reserve cut interest rates by 25 basis points on Wednesday, with Powell downplaying the certainty of a December rate cut.
The Federal Reserve cut its benchmark interest rate by 25 basis points on Wednesday to a range of 3.75%-4.00%, the lowest level in three years. Fed Chairman Jerome Powell subsequently told reporters that another rate cut in December was "far uncertain," noting that the ongoing US government shutdown was limiting access to key economic data needed for policy assessment.
Federal Reserve officials are divided on further easing.
Two Federal Reserve officials voted against this week's interest rate cut, highlighting growing policy disagreements within the central bank. Kansas City Fed President Jeffrey Schmid and Dallas Fed President Lorie Logan both opposed the rate cut, citing persistent inflationary pressures and resilient financial conditions.
Schmidt pointed out that the strong stock market, narrowing corporate bond spreads, and robust credit issuance all indicate that financial conditions remain accommodative. Logan added that future rate cuts would require "clear evidence" of a faster slowdown in inflation or a significant slowdown in the labor market.
The market has already reacted sharply to this. According to the CME Group's FedWatch Tool, the probability of another rate cut in December has fallen from 92% a week ago to 63%.
Treasury yields remained firm following the Federal Reserve's decision.
On Friday, the 10-year U.S. Treasury yield briefly touched 4.10% during the session before stabilizing around 4.089%. The 2-year Treasury yield fell to 3.594%, while the 30-year Treasury yield remained around 4.659%. The rebound in yields from previous lows below 4.00% highlights investor concerns about whether the Federal Reserve will continue its accommodative policy should no new data emerge showing weakening economic growth or inflation.
A stronger dollar puts pressure on major global currencies.
The US dollar outperformed other major currencies in global markets. The yen traded at 154.125 against the dollar, down 4% in October, its worst monthly performance since July, despite a 2.8% year-on-year increase in core inflation in Tokyo. The Bank of Japan's decision to keep interest rates unchanged provided little support for the yen.
The pound fell 0.2% against the dollar to 1.312, on track for a monthly decline of 2.3%, as investors awaited the upcoming budget announcement from Chancellor Rachel Reeves. The European Central Bank kept interest rates unchanged at 2% for the third consecutive meeting, reinforcing the dollar's yield advantage; the euro was flat against the dollar at 1.1562.
Market Outlook: The US dollar remains bullish in November.
(US Dollar Index, source: FX678)
Hawkish comments from the Federal Reserve, strong Treasury yields, and interest rate differentials with other major economies continue to support a stronger dollar. A sustained break above 100.257 in the dollar index could attract further buying momentum.
The US dollar is expected to remain bullish in November, influenced by the US government shutdown which limited data releases and cooled expectations for further easing.
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