US dollar gains on rate policy speculations

The US dollar is trading in the green territory against major G20 peers, with traders expecting a quick return to normal rate policy. The latest FOMC Minutes revealed that cuts are not in the plan for the upcoming meetings, which dampens market bets that cuts might be very close, even in December.

The calendar has helped the US Dollar Index surge further, with consumer inflation expectations data from the University of Michigan confirming that the Fed is correct in not letting loose too quickly. A steady 3.2% still points to sticky inflation above the 2% target of the Fed.

Equities are mildly in the green as stock markets were not helped by disappointing Nvidia earnings and the Sam Altman saga with Microsoft and AI.

The CME Group’s FedWatch Tool shows that markets are pricing in a 94.8% chance that the Federal Reserve will keep interest rates unchanged at its meeting in December, with 5.2% even thinking a hike might be at hand. The benchmark 10-year US Treasury Note yield trades at 4.38%, near new lows for the week.

The dollar is snapping the game plan that should have brought the US Dollar Index below 103.00 for this week, with the DXY trying to head back above the 200-day Simple Moving Average (SMA).