VT 
Markets face a week of hesitation rather than conviction. The message from the Federal Reserve in late-October has changed the tone: A December rate cut is no longer a certainty. Chairman Jerome Powell stressed that policy will depend on incoming data, yet a federal government shutdown means much of that data may not even be arriving. Without clear visibility, the Fed is “driving in fog”, and traders are reassessing how quickly easing might resume. This leads to a conflicted dollar, cautious equities, and traders leaning toward safety until the fog clears.
The Fog Before the Cut
Before the October FOMC meeting, futures markets were nearly unanimous in expecting a December rate cut. But after Powell’s remarks, the mood flipped. The CME FedWatch tool shows cut odds plunging from roughly 90% to 63%, while Polymarket odds echo a 66% probability of a quarter-point cut and 32% chance of no change.
In other words, the market still expects easing, but no longer trusts it.
This shift stems from Powell’s emphasis on divided policymaker views and the data blackout caused by the federal shutdown.
With no fresh economic numbers, policymakers are flying blind, and traders are hedging both sides of the trade. Volatility pricing suggests markets are preparing for a slower, messier glidepath into December rather than a clean rate-cut narrative.
Inflation Cools, but Fed is still Hesitant
Inflation is cooling “like a rock”, yet the Fed remains wary of cutting too soon and risking a rebound.
The September CPI rose 3.0% y/y, up slightly from 2.9% due to energy prices, yet the underlying picture looks softer:
- Core CPI held steady at 0.3% m/m, consistent with a gradual slowdown.
- The shelter component, which is the single biggest driver of inflation, felll to 0.16% m/m, the lowest in over a year.
- More than 51% of CPI components are now deflating from their peaks, compared with a long-term average of 32%.
All suggesting that the fight against inflation is largely won, although Fed staff still projects core PCE to end the year near 3%. Markets reacted as the overall tone of price pressures has turned decisively lower.
- Equities pulled back from recent highs as traders priced in fewer cuts and slower growth.
- The US Dollar Index (USDX) rebounded toward the 99.00–100.00 zone, reflecting a defensive bias.
- Gold stalled near $4,070, trapped between softer inflation and a stronger dollar.
- Yields edged lower but not enough to trigger renewed equity momentum.
Key Economic Events to Look Out for
| Date | Event | Forecast | Previous | Analyst Remarks |
| 4 Nov 2025 | JOLTS Job Openings | 7.21 M | 7.23 M | Persistent declines in openings would point to cooling labour demand and weigh on the dollar. |
| 5 Nov 2025 | ISM Services PMI | 50.8 | 50 | Service-sector momentum remains crucial for growth outlook; above 51 favours USD rebound. |
| 8 Nov 2025 | Core PCE m/m (Tentative) | — | — | The Fed’s preferred inflation gauge; soft reading may revive December cut hopes. |
| 8 Nov 2025 | Non-Farm Payrolls | — | — | Jobs and wage data will define rate-cut probability and short-term USD direction. |
| 8 Nov 2025 | Unemployment Rate | — | — | Any uptick above 4 % could tilt sentiment dovish and pressure yields. |
Key Symbols to Watch
USDX (Dollar Index)
- Still supported by reduced rate-cut certainty; consolidation near 99.00.
- Watch 98.50 as short-term support; resistance at 100.20.
- Break above 100 could extend toward 100.75; reversal signals near 98.50.
Gold (XAUUSD)
- Stalled around $4,070 as traders balance cooling inflation with firmer yields.
- Resistance at $4,120; support near $3,930.
- Range-bound until clearer Fed direction.
SP500
- Pulled back after testing 6,950 as caution dominates.
- 6,750 support remains critical; 7,000 psychological barrier caps upside.
- Sensitive to shifts in rate-cut probabilities and shutdown headlines.
BTCUSD
- Consolidating above 106,000; upside targets 112,800–114,650 if risk stabilises.
- Break below 106,000 exposes 103,500.
- Volatility may pick up as liquidity thins into mid-month.
Key Takeaway for the Week: Cautious Easing Ahead
The path forward likely depends less on one data print and more on how long the uncertainty lasts. If the shutdown drags on beyond mid-November as current betting odds suggest, the Fed could enter December with incomplete data. Such a scenario argues for a 25 bps cut as the base case, but with low conviction.
In essence, markets are confronting a split narrative, with macro data supporting a cut, cautious policy delaying and as a result, risk assets kept drifting sideways in the meantime.
Traders are now positioning for a possible rate cut in December, but with no clear signal from the Fed, the U.S. dollar has held steady and broader risk sentiment remains subdued.
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