The Fed kept the rate in the 3.75-4.00% range. The decision was made at the FOMC meeting on October 27-28. The vote was split 10 against 2.
The FOMC is the Fed committee that decides on the rate. It has twelve members. The rate sets the cost of money in the US and directly affects the dollar's exchange rate.
For a trader, the key thing is not the decision itself but the wording. The committee did not take a December rate hike off the agenda. Dollar pairs remain sensitive to every US data point.
What exactly did the committee decide?
The rate was left untouched. The decision matched market expectations. It was not unanimous: two of the twelve committee members voted against.
- Strong - this is how the statement described the US economy
- Elevated - this is the assessment the committee gave to inflation
- December - the possibility of a rate hike at that meeting was not explicitly ruled out
Why is this more important than the decision itself?
For the currency market, this is a hawkish signal. A higher rate makes the dollar more expensive compared with currencies where rates are being cut.
Key point: the market got not a pause but an open door. Until December, any strong US data will play in the dollar's favor.
What does HSBC say?
HSBC maintains its call for a strong dollar through 2027. The bank gave three reasons:
- Economic resilience. The American economy is holding up better than expected.
- The Fed's hawkish stance. The committee is in no hurry to ease policy.
- Competitors' problems. Other major currencies have their own difficulties.
The bank's caveat is blunt: "the dollar faces a bumpy road through the end of the year", there will be no smooth path. The bank does not name specific targets for the dollar index. This is the analysts' opinion, not a market fact.
What is the backdrop?
The picture is mixed. The US economy grew 3.4% year-on-year in the latest reporting quarter. At the same time, yields on US Treasuries were falling.
- -6.87% - how much gold lost in October
- $3,870 - the yearly low the metal moved toward
This behavior in gold is typical of periods of a strong dollar.
What's next?
The main focal point is the December Fed meeting. It will become clear then whether the wording left in place was a real hint or a safeguard. It's worth marking the date in advance in the economic calendar.
- US macro data - until December, it moves dollar pairs more than anything else
- Fed rhetoric - any clarification of the wording changes rate expectations
Did you hold a dollar position on FOMC day?
Familiar: the decision is already known, yet the market jerks back and forth on the statement's wording. And this is exactly where prop programs diverge the most: in some, a trade a couple of minutes before the release is entirely against the rules; in others, it's allowed, but the account is closed for exceeding the leverage limit during those minutes. They also differ in how they calculate daily drawdown: by closed trades or by current. Before the December meeting, there's still time to read this in the terms.