Hawkish Fed Signals Lift US Dollar (10.29.2026)
The Federal Reserve held rates at 3.75–4.00%, with Lisa Cook and Beth Hammack dissenting in favor of a hike. Chair Kevin Warsh described the economy as strong but not overheating, offering little guidance on December. He also announced plans to reduce policy meetings to seven in 2027 and six in 2028, potentially increasing the impact of each decision.The US 10-year Treasury yield remained above 5%, while the Dollar Index hovered near 102.1 following the decision. Despite slightly softer language in the Fed’s statement, the two hawkish votes and persistent energy-driven inflation kept December hike expectations alive. With the November 3 midterms approaching, US PCE inflation data and upcoming ECB and BOJ decisions could provide further direction.
Brent eased toward $114, while WTI traded near $102, following reports of US-Iran diplomatic outreach led by Vice President JD Vance and new Qatari peace proposals. Yet prices remain near six-month highs as Trump signals possible strikes after the midterms and recent Houthi attacks on Saudi energy facilities threaten regional supplies.
Economic Calendar
- EUR/USD weakened toward 1.1140 as the dollar recovered following the decision to hold US interest rates at 3.75–4.00%. Dissenting votes from Cook and Hammack, both favoring a 25-basis-point hike, reinforced expectations of further tightening in December.
- The yen stabilized near 157.7 per dollar after earlier losses, benefiting from demand for safer assets following disappointing earnings from Alphabet and Samsung. The results revived concerns about AI investment returns, partially offsetting dollar strength.
- GBP/USD drifted lower toward 1.3300 during Thursday's Asian session as US dollar demand resurfaced. Markets currently price roughly an 80% probability of a December Federal Reserve rate increase, driven by lingering energy-related inflation risks, while ongoing U.S.-Iran geopolitical friction continues to support safe-haven dollar bids. However, growing expectations of near-term Bank of England monetary tightening are helping cushion sterling's downside.
- USD/CNH traded near 6.6580, with the yuan gaining 0.76% over the past month and approximately 4.6% this year.
- The PBoC set its daily USD/CNY reference rate at 6.7147, while expectations of tighter US monetary policy supported a dollar recovery.
- Gold slipped below $4,050, surrendering part of its recent gains as expectations of a December US rate hike strengthened. Chair Kevin Warsh also proposed reducing annual policy meetings from eight to six, potentially making future decisions less predictable.
- Silver traded under $53 per ounce on Thursday, hovering near one-year lows after the Federal Reserve kept interest rates steady without offering clear forward guidance. However, two hawkish dissents favoring an immediate rate increase increased market expectations for December policy tightening amid persistent energy-driven inflation. Uncertainty mounted further after Fed Chair Kevin Warsh suggested reducing annual policy meetings from eight to six.
- Bitcoin fell 1.91% to $79,725, extending its four-week decline to 4.56%. The cryptocurrency has lost 26.40% over the past year, although Trading Economics projects a recovery to $81,901 by quarter-end and $90,304 within twelve months.
- Brent slipped toward $110 a barrel as diplomatic efforts offered hope of containing the Middle East conflict. Vice President JD Vance reportedly contacted Iranian official Mohsen Rezaei, while Trump confirmed indirect negotiations through mediators.
- The Nasdaq 100 traded near 29,400, struggling to recover from the previous session’s selloff. Expectations of a December US rate hike have added pressure to richly valued technology stocks, particularly as concerns about AI spending and profitability persist.
