With the market betting on a December rate cut, the PPI has become the focus
Waller supports a December rate cut, solidifying the Fed's dovish stance and raising the probability of a rate cut to 80%. Today's PPI data is crucial and will determine whether the dollar can hold the 100 mark.
Today saw a decisive shift in market sentiment. Concerns about "higher-for-longer" interest rates are rapidly fading, replaced by renewed optimism that the Federal Reserve may cut rates in December.
Waller's dovish signal : Federal Reserve Governor Christopher Waller has made it clear that he supports a rate cut at the December meeting. He warned that maintaining restrictive interest rates for too long could harm the labor market.
Rate cut probability surges : Waller's comments drive market expectations for aggressive repricing. CME FedWatch shows an approximately 80% probability of a 25 basis point rate cut in December , making a rate cut the new benchmark scenario.
PPI: A decisive indicator of inflation
With the US government shutdown leading to the cancellation of the October CPI data release, the September Producer Price Index (PPI) released today is of unusual importance, becoming the only reliable proxy indicator for current inflation dynamics.
Soft PPI Expectations : Weak PPI readings (in line with or below the 0.3% forecast) would reinforce dovish sentiment, strengthen the case for a December rate cut, and could add further downward pressure on the dollar.
High PPI risk : Higher-than-expected PPI will challenge the emerging dovish narrative, restart market volatility, and may force the Federal Reserve to return to a more cautious "wait-and-see" stance.
Outlook for the US Dollar and Risk Assets
The dollar is under pressure : As the market digests the Fed's more dovish stance, the dollar index has hovered around the 100.00 level for four consecutive trading days. A break below 100.00 could trigger a new round of short-term dollar weakness.
USDX, Daily Chart | Ultima Markets MT5
Risk appetite returns : The prospect of cheaper liquidity has revitalized risk appetite, leading to a rebound in the Nasdaq and S&P 500 indices, while also boosting the cryptocurrency market, including Bitcoin and Ethereum.
Bitcoin (BTC) : From a technical perspective, Bitcoin needs to reclaim the psychological level of 90,000 to confirm improved sentiment and unlock further upward momentum.
BTCUSD, Daily Chart | Ultima Markets MT5
Risk Warning : Trading leveraged derivatives involves high risk and may result in capital loss.
Author：Ultima Markets Daily Insight
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In summary , the market has shifted from "fearing the Fed" to "betting on the Fed." If today's PPI meets expectations, it will kick off a pre-holiday rebound in stocks and cryptocurrencies, likely at the cost of a weaker dollar.
