The Federal Open Market Committee (FOMC) is expected to lower the target range for the federal funds rate by 25 basis points, bringing it to 3.50-3.75%. This decision might see some disagreement due to concerns about inflation and a decline in employment. Jerome Powell is likely to stress that the Fed will depend on the latest data, meaning decisions will be made one meeting at a time. The dot plot may attract attention but might not fully reflect the impacts of the Trump administration.

Market Observations

The FXStreet Insights Team gathers observations from market experts, including notes and insights from analysts. Their content covers changes in currencies and commodities, such as EUR/USD and gold, in response to economic data and the Federal Reserve’s expectations. Experts believe cryptocurrencies like Bitcoin will hold their value amid steady market dynamics before the Federal Reserve meeting on December 10. Also, monetary policies from other banks like RBA, BoC, and SNB are not expected to surprise. Ripple continues to decline, although inflows into XRP spot ETFs remain steady. The market information is for reference, and investing carries risks, with FXStreet not responsible for any errors. With the Federal Reserve likely to cut rates by 25 basis points next week, traders should prepare for the announcement itself. The market has already factored this in, with data from the CME FedWatch tool in early December 2025 suggesting over a 90% chance of a cut to the 3.50-3.75% range. This certainty means the real trading opportunities will come from the details of the Fed’s message. The main conflict is regarding the data, creating uncertainty that derivative traders can exploit. The November 2025 jobs report revealed only 95,000 new jobs, prompting the Fed to consider easing policy. However, the latest core PCE inflation reading for October 2025 stayed stubbornly at 3.1%, making some FOMC members cautious about cutting rates.

Strategies for Volatility

This conflict suggests that preparing for a volatility spike around the meeting is a smart approach. We find options on equity indices appealing, as the market can react strongly to any hint of disagreement or a more hawkish tone from Chairman Powell. The VIX index, which rose from lows near 13 in October 2025 to around 18 now, indicates growing nervousness. In the currency markets, the U.S. Dollar is at a crucial point. A dovish Fed signaling more cuts could elevate pairs like EUR/USD and AUD/USD, while a “one-and-done” message could trigger a sharp rally for the dollar. Trading options instead of spot FX allows traders to capitalize on significant moves in either direction while managing risk. For commodities, gold’s price at $4,200 an ounce reflects expectations of rate cuts. We believe long positions through gold futures or call options remain a good strategy as long as the Fed continues its easing cycle. This trend began when the Fed paused its historic rate hikes from 2022-2023 and started signaling a shift earlier this year. Looking ahead to early 2026, the Fed’s new dot plot will be a point of interest, but we feel it might downplay future policy. The fiscal plans of the incoming administration remain uncertain and could complicate the Fed’s efforts against inflation. This suggests that longer-dated options betting on higher volatility next year may be undervalued. Create your live VT Markets account and start trading now.

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