Insights 
VT 
Jeffrey Schmid, President of the Federal Reserve Bank of Kansas City, discussed economic outlook and monetary policy at a conference in Denver. Schmid stated that monetary policy should counteract demand growth and stressed the importance of vigilance regarding inflation expectations.
His concerns on inflation go beyond tariffs, asserting that inflation remains high, while the labour market is cooling but balanced. Schmid supports the decision to halt the shrinking of the Fed’s balance sheet and suggested policy adjustments to support liquidity without relying on rate cuts.
Us Dollar Performance
He noted that the financial markets and real economy do not appear overly constrained, and the cooling in the labour market likely signals structural changes. However, Schmid is prepared to monitor for signs of further labour market decline closely.
The US Dollar showed varying performance against major currencies, with the strongest gain against the British Pound. The percentage changes of the US Dollar against other currencies were documented in a detailed currency table.
These findings were published by Agustin Wazne, a Junior News Editor at FXStreet, who focuses on commodities and major currencies. Markets move quickly, and FXStreet aims to provide expert insights, though they do not offer personalised investment advice.
With influential voices at the Fed signaling that policy will lean against demand, we should adjust our expectations for a dovish pivot. The concern that inflation is too hot means the bar for any rate cuts in the near future is very high. This hawkish stance is trimming bets for a December rate cut and strengthening the US Dollar.
Inflation Report Insights
The latest Consumer Price Index report for October 2025 showed headline inflation at 3.2%, which supports the view that the fight is not over. While the labor market is cooling, with the last NFP report adding a moderate 170,000 jobs, it isn’t weak enough to force the Fed’s hand. This is why CME FedWatch tool probabilities for a December cut have fallen from over 65% just last week to below 40% now.
For currency traders, this reinforces a long-dollar strategy, particularly against currencies with more dovish central banks. We should consider buying call options on the US Dollar Index (DXY) or setting up bullish positions in pairs like USD/JPY. The current strength of the dollar, especially against the British Pound, is likely to persist as long as the Fed remains the most hawkish player.
In the rates market, we should anticipate the yield curve remaining flat or even inverting further as near-term rates stay elevated. This means positioning for “higher for longer” using options on SOFR futures, possibly selling out-of-the-money calls. This environment is a headwind for equities, making protective put options on major indices like the S&P 500 a prudent defensive strategy.
We have seen this pattern before, particularly during the persistent inflation fight of 2022-2023, where markets that priced in premature rate cuts were punished. This ongoing restrictive policy makes non-yielding assets unattractive, which explains why gold is struggling to hold above the $4,000 level. Bearish positions on gold futures, through buying puts or selling calls, align with the Fed’s current messaging.
