Powell turns hawkish: The Fed cuts rates but slams the brakes on December hopes, the dollar bites back.
Gold and Bitcoin stumble: Safe havens lose their shine as traders rotate back into the greenback
Central bank week ahead: RBA, BOE, and a flood of Fed speakers, plus the will-they-won’t-they US data releases.
It was a week of central bank rate decisions, and with that came very few surprises.
The Fed delivered the expected 25 basis point rate cut, but Chair Powell’s tone was noticeably more hawkish. Anyone hoping for another cut in December was left disappointed. His comments opened the door to more dollar buying, with the greenback finishing the week up about 1.2% from its lows.
Stocks also took the message on board. Higher borrowing costs are rarely good news for equities, making expansion and financing more expensive. The Dow and S&P 500 both ended the week slightly lower after two weeks of gains, while the Nasdaq managed to close a touch higher, helped by a strong earnings forecast from Amazon. Talk of progress between President Trump and President Xi on trade helped support US indices despite the Fed’s firmer tone.
Gold and Bitcoin both felt the squeeze. Gold is now trading around 10% below its all-time highs from earlier in the month, pressured by a stronger dollar and the absence of new buying interest. Bitcoin also struggled under the weight of the Fed’s outlook for rates, losing some of the shine it had built up in recent weeks.
Next up was the European Central Bank. As expected, the ECB left rates steady at 2%. Market watchers hoping for hints of easing were met instead with cautious comments from President Lagarde. Her tone leaned slightly hawkish, suggesting the ECB will hold steady until at least the first quarter of 2026. That outlook could keep the euro reasonably well supported in the short term.
Over in Japan, the Bank of Japan also left policy unchanged. Those hoping for signs of tightening were again left wanting. Governor Ueda cited global trade uncertainty as the key concern. The yen fell another 1% on the week, extending a monthly drop of about 4%. The weakness was driven as much by dollar strength as by Japan’s domestic policy stance.
Looking ahead, it’s shaping up to be another busy week on the central bank front.
The Reserve Bank of Australia meets first and is expected to keep rates at 3.6%. Futures markets show no cuts likely until early next year. Then on Thursday, the Bank of England takes the stage. With UK inflation still stubbornly high at roughly double its target, rates are almost certain to stay put at 4%. Governor Bailey’s speech afterwards will be closely watched for any hints on when the cutting cycle might begin.
Thursday will also see a parade of Fed speakers — six of them in total — sharing their latest views. Last week the tone was distinctly hawkish, and traders will be listening closely to see if that message continues. If it does, the dollar could easily finish the week strong again.
Friday should be a big day for data, with the monthly Non-Farm Payrolls and Core PCE numbers scheduled for release. The catch, of course, is that the ongoing US government shutdown continues to throw these reports into doubt. We’re still waiting to hear whether they’ll even be published. If they are, I’ll be streaming them live, so keep an eye on our YouTube channel and hit the notification bell to stay in the loop.
Markets are moving to the rhythm of central banks right now. The message remains the same: stay patient, trade your strategy, and don’t fight the trend. As always inside PropIQ, we focus on trading what we see, not what we think.
Disclaimer
This market commentary is provided for educational and informational purposes only. It reflects the opinions of the author at the time of writing and should not be taken as financial or investment advice.
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About Andrew Lockwood
Andrew Lockwood is a seasoned professional trader with over 40 years of experience in financial markets. Starting his career on the floor of the London International Financial Futures Exchange (LIFFE) in the 1980s, Andrew has traded through multiple market cycles and volatility regimes. Today, he specialises in prop trading strategies, focusing on technical setups, risk management, and trader psychology. As the founder of PropIQ and a leading mentor, Andrew is dedicated to training the next generation of prop traders with proven, real-world trading methods.