Two hike votes as Fed holds: Dollar Index recovers after dip

• 101.90 Holds as DXY Rebounds Towards 102.00 After Fed Leaves Rates Unchanged.
• Another hike this year was projected by sixteen of 18 Fed officials in September.
• Wednesday brings questions for Fed Chair Warsh; US GDP and PCE follow on Thursday.

The Fed kept rates at 3.75%-4.00% on Wednesday. Two officials voted for a hike, leaving December as this year's final opportunity to deliver the increase most officials had projected. In the five-minute bar covering the statement, the Dollar Index slipped to just above 101.90 before rebounding within the same bar. It did not reach the pre-decision session low near 101.85 and now trades just below 102.00.

A quarter-point increase was backed by Fed Governor Cook and Cleveland Fed President Hammack. MUFG had previously said this type of dissent would reinforce expectations of a December hike. While describing inflation as still elevated, the statement offers no timetable for the next change. It says only that further information will help determine the policy stance. Following the release, the Dollar Index remained within its pre-decision trading range.

At least one further hike this year featured in the September projections of 16 of the Fed's 18 officials; four anticipated two. With October now past, December is the sole remaining meeting for either outcome. Delivering two hikes at that meeting would require a half-point increase, a step the Fed last took in December 2022. Before the decision, traders priced the probability of a December hike at near 80%, aligning with the 16 officials rather than the four.

12:30 GMT: US GDP and PCE Due Thursday

Thursday's 12:30 GMT releases cover third-quarter Gross Domestic Product (GDP) and the September Personal Consumption Expenditures Price Index (PCE). These will be the first US data since the rate hold with implications for December. Also on Thursday, the European Central Bank (ECB) announces its decision at 13:15 GMT, followed by the Bank of Japan (BoJ) on Friday. Those decisions concern the Euro and Yen, which together account for about 71% of the index.

At 18:30 GMT on Wednesday, Fed Chair Warsh begins his press conference. Speaking in Bangkok on October 16, he said he does not pre-judge meetings. With two colleagues already favouring a hike, his responses on December will directly inform the pricing underpinning the Dollar Index.

102.15: DXY's Session High Remains Above the Market

Just above 102.15 marked the index's session high in the first half of Wednesday. It subsequently dropped to the session low, then retraced about half the decline ahead of the statement. Despite the rebound within the decision bar, the index remained below its opening level for the day. The advance into the announcement had pushed intraday momentum into overbought territory.

5-minute DXY chart