Dollar Index dips and recovers as the Fed holds with two hike votes

The Fed held at 3.75%-4.00% on Wednesday with two votes for a hike, which leaves December as the last meeting this year for the increase most officials projected. The Dollar Index dipped to just above 101.90 in the statement's five-minute bar and recovered inside it, short of the session low near 101.85 from before the decision. It's trading just under 102.00.

Fed Governor Cook and Cleveland Fed President Hammack voted to raise by a quarter-point, the kind of dissent MUFG had said would firm up bets on a December hike. The statement says inflation remains elevated and gives no timing for the next move, only that more information will help set the policy stance. The Dollar Index came out of it inside the range it traded before the decision.

In September, 16 of the Fed's 18 officials projected at least one more hike this year, and four pencilled in two. With October gone, December is the only meeting left for either, and two hikes there would take a half-point move, last made by the Fed in December 2022. Traders had a December hike near 80% priced before the decision, a bet on the 16 rather than the four.

On the calendar

Third-quarter Gross Domestic Product (GDP) and the September Personal Consumption Expenditures Price Index (PCE) come out on Thursday at 12:30 GMT. They're the first US figures since the hold to bear on December. The European Central Bank (ECB) decides at 13:15 GMT the same day and the Bank of Japan (BoJ) on Friday, for the Euro and Yen that make up about 71% of the index.

Fed Chair Warsh's press conference starts at 18:30 GMT on Wednesday. In Bangkok on October 16 he said he doesn't pre-judge meetings, and with two of his colleagues already voting to hike, his answers on December go straight to the pricing behind the Dollar Index.

On the charts

The index set its session high just above 102.15 in the first half of Wednesday, then fell to the low and won back about half of that drop before the statement. The decision bar's dip and recovery left it below where it started the day. Intraday momentum reached overbought on the climb into the decision.

DXY 5-minute chart