Insights 
VT 
Beth Hammack from the Federal Reserve is set to engage in a discussion at a conference hosted by the Dallas Fed. She expressed her stance against cutting rates and emphasised the importance of understanding the economy thoroughly.
She noted signs of weakness in the labour market, such as layoffs, and mentioned the need to maintain some restriction to manage inflation. She also pointed out that tariffs, electricity, and insurance contribute to inflation, with little progress in core services excluding housing.
US Dollar and Market Movements
The US Dollar has shown variations against other major currencies, being strongest against the New Zealand Dollar. As of today, EUR/USD and GBP/USD have fallen to notable lows due to the Fed’s hawkish tone. Gold has dipped below $4,000, facing its second weekly loss.
In the financial world, Bitcoin has bounced back after several days of decline, indicating market demand fluctuations. Meanwhile, central bank meetings next week may challenge the Dollar’s current strength, impacting risk sentiment. The 17th anniversary of the Bitcoin whitepaper is marked, underscoring its evolution from a concept to a significant financial asset.
The Federal Reserve is signaling it’s not ready to ease policy further, creating a challenging picture for the weeks ahead. We’re hearing that the recent rate cut might have been premature, as inflation remains a significant concern. This hawkish tone suggests the central bank will need to keep its policy restrictive to bring prices down.
The latest inflation data supports this view, with the September 2025 Consumer Price Index (CPI) showing core inflation stubbornly holding at 3.5%. More concerning is the “supercore” inflation metric, which excludes housing and remains elevated at 4.1%, showing little progress. This is the exact area Fed speakers are highlighting as a problem, alongside rising electricity and insurance costs.
Current Market Considerations
We must be cautious about reading too much into the weak September payrolls report, which showed a gain of only 50,000 jobs. While that dip prompted the last rate cut, the overall labor market is not collapsing, with unemployment still low at 3.9% and wage growth sticky at 4.2%. This suggests the Fed will wait for more conclusive evidence of a downturn before signaling any further easing.
Given this backdrop, the US Dollar’s strength is likely to persist against major currencies in the short term. We have seen the EUR/USD break below 1.1520 to three-month lows, and this trend has room to run as long as the Fed remains more hawkish than the European Central Bank. Options traders could consider strategies that profit from low volatility and a continued grind lower in pairs like EUR/USD and GBP/USD.
For interest rate derivatives, this signals that the path forward is uncertain, creating opportunities in volatility. The Fed’s policy rate, currently at 4.75%, is seen as only “barely restrictive,” meaning the odds of another hike are not zero, even after the last cut. Traders should look at options on Treasury futures or SOFR futures to position for potential price swings rather than betting on a clear direction.
This environment acts as a headwind for assets like gold, which is struggling to hold the $4,000 level. A strong dollar and restrictive interest rates, a lesson we learned during the 2022-2024 tightening cycle, reduce the appeal of non-yielding bullion. Similarly, while Bitcoin has shown some resilience above its 200-day moving average, a risk-off sentiment driven by Fed uncertainty could cap any significant rally in the near term.
