Insights 
VT 
Federal Reserve Governor Lisa Cook discussed the economic outlook and monetary policy at the Brookings Institution. She noted the Fed’s recent interest rate cut was appropriate due to job market risks, with growth expected to return even though the government shutdown is affecting the economy.
Cook emphasised that each US central bank meeting is vital for monetary policy decisions, as there is no fixed path. She described the current policy as moderately restrictive, aimed at reducing inflation pressures. The policy stance remains focused on getting inflation back to the target of 2%, despite the impact of tariffs on price pressures.
Monitoring The Labour Market
Monitoring the labour market for signs of trouble remains essential, with inflation being elevated and at risk of further increase. Cook remains vigilant regarding inflation expectations, closely observing tariff effects on businesses and families. Real-time data indicates a slowdown in hiring, highlighting the need for a timely approach to rate decisions.
The US Dollar’s change against major currencies was detailed, with its strength most evident against the Swiss Franc. In related news, Agustin Wazne joined FXStreet as a Junior News Editor, covering commodities and major markets. Legal information emphasised investment risks and the non-advisory nature of the content.
We are seeing a Federal Reserve that is clearly conflicted, creating a valuable environment for trading volatility. The recent 25 basis point interest rate cut in October 2025 was a signal that they are worried about the job market, but their language shows they are not ready to declare victory over inflation. This tension between mandates means we should not expect a clear, straight path for monetary policy in the coming weeks.
The main concern is the labor market, which could deteriorate quickly. We have seen the unemployment rate tick up from a low of 3.9% earlier in the year to 4.2% in the last quarter, a trend that has the Fed’s attention. This justifies bets on further rate cuts, which could be priced into options on interest rate futures ahead of the December meeting.
Inflation Concerns Remain
On the other hand, inflation remains a persistent threat. The latest Core PCE reading came in at 2.8%, which is still well above the 2% target and is a nagging reminder of the inflation spike we saw back in 2022 and 2023. This upside risk means the Fed could easily hold rates steady or even adopt a more hawkish tone if upcoming price data is hot.
This uncertainty is being reflected in the market’s fear gauge. The VIX index, which measures expected volatility in the S&P 500, has climbed from the mid-teens to hover around 20, showing that investors are preparing for larger price swings. This suggests that strategies like buying straddles or strangles on major indices could be profitable, as they benefit from a significant move in either direction.
The US dollar’s current strength adds another layer to the puzzle. Its rise today, particularly the 0.36% gain against the Swiss Franc, indicates that the market is still pricing in a degree of policy restriction from the Fed despite the recent cut. This creates opportunities for currency traders, as a surprisingly weak jobs report could cause a sharp reversal in the dollar’s fortunes.
Therefore, traders should be positioned for sharp reactions to incoming data, especially the November employment report and the next CPI inflation numbers. Options on short-term Treasury notes, like the 2-year, will be extremely sensitive to any new information that could influence the Fed’s December decision. The key is to trade the uncertainty itself, as the Fed has made it clear that its next move is not predetermined.
