Beth Hammack from the Federal Reserve will participate in a conference hosted by the Dallas Fed. She is against cutting interest rates and stresses the need to fully understand the economy. She pointed out some issues in the job market, including layoffs, and emphasized the necessity of keeping some restrictions in place to control inflation. Hammack noted that factors like tariffs, electricity, and insurance contribute to rising prices. Additionally, there has been little progress in core services, excluding housing.

US Dollar and Market Movements

The US Dollar has fluctuated against major currencies, showing strength against the New Zealand Dollar. Today, the EUR/USD and GBP/USD pairs have dropped to significant lows due to the Fed’s aggressive stance. Gold has fallen below $4,000, marking its second weekly decline. In the financial market, Bitcoin has bounced back after several days of losses, indicating changes in market demand. Next week’s central bank meetings could test the Dollar’s current strength, influencing market risk. This week we celebrate the 17th anniversary of the Bitcoin whitepaper, highlighting its growth from an idea to a crucial financial asset. The Federal Reserve is indicating that it is not ready to ease its policies, setting a challenging scene for the near future. Recent discussions suggest that the last rate cut may have been too early, as inflation remains a pressing issue. The Fed’s assertive approach indicates that the central bank will need to keep its policies tight to help reduce prices. Recent inflation data reinforces this perspective. The September 2025 Consumer Price Index (CPI) shows core inflation stubbornly remains at 3.5%. More troubling is the “supercore” inflation measure, excluding housing, which stands at 4.1% with no improvement. This is the area where Fed officials are focusing their concerns, along with rising costs for electricity and insurance.

Current Market Considerations

We should be cautious not to over-interpret the weak September payroll report, which revealed an increase of only 50,000 jobs. Although this decline led to the recent rate cut, the overall job market remains stable, with unemployment low at 3.9% and wage growth sticking at 4.2%. This indicates that the Fed will likely wait for clearer signs of a downturn before indicating any further rate cuts. With this context, the US Dollar’s strength is expected to continue against major currencies in the short term. The EUR/USD has dropped below 1.1520, reaching three-month lows, and this trend may continue as long as the Fed stays more aggressive than the European Central Bank. Options traders might explore strategies that benefit from low volatility and potential further declines in pairs like EUR/USD and GBP/USD. For interest rate derivatives, the future path appears uncertain, creating opportunities in volatility. The Fed’s policy rate, currently at 4.75%, is regarded as only “barely restrictive,” meaning there’s still a chance for another hike, even after the last decrease. Traders should consider options on Treasury futures or SOFR futures to prepare for potential price fluctuations rather than relying on a clear market direction. This market environment poses challenges for assets like gold, which is struggling to maintain the $4,000 level. A strong dollar combined with tight interest rates—something we learned during the 2022-2024 tightening cycle—diminishes the appeal of non-yielding bullion. Although Bitcoin has shown resilience above its 200-day moving average, uncertainty from the Fed could limit any notable rallies in the near future. Create your live VT Markets account and start trading now.

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