Fed Set to Drive the Market: Hawkish or Dovish Cut?

Daily Market Insights – December 10, 2025, brought to you by Ultima Markets.

Global markets are holding their breath as attention now shifts entirely to the Federal Reserve’s (Fed) interest rate decision tonight. With a December rate cut firmly expected, the debate has moved from “whether they will cut” to “will it be a hawkish cut or a dovish pivot?”—a distinction that will determine the near-term direction of the U.S. Dollar and risk assets.

Federal Reserve FOMC Preview: Hawkish vs. Dovish Cut

Tonight’s decision is set to be the most consequential policy event of the year, carrying far greater influence than any of the recent data releases.

• The Interest Rate Decision, Summary of Economic Projections (SEP), and Dot Plot will be released at 2:00 PM ET, followed by Chair Powell’s press conference at 2:30 PM ET.
• Market Consensus: A 25-bp rate cut is widely expected, bringing the target range down to 3.50%–3.75%, currently priced at 87%–90%. Since the cut itself is already fully priced in, market sensitivity now hinges entirely on the Fed’s communication.

Given the conflicting labor data (weak ADP vs. strong Jobless Claims) and inflation still above target (PCE at 2.8%), many expect a hawkish cut. This scenario involves the Fed cutting rates but signaling caution on the pace of future easing, emphasizing that inflation risks remain.

Key Elements to Watch Tonight

The real focus is the Dot Plot, which shows members’ interest rate projections for 2026 and beyond. If the median projection shows fewer cuts than the market currently expects (~four cuts), the Dollar could spike sharply.

According to the September Dot Plot, most officials projected 0–4 cuts in 2026. If tonight’s Dot Plot signals a more dovish stance, it could send the US Dollar lower, representing a dovish pivot scenario.

Additionally, Powell’s language will be closely watched. Any emphasis on “remaining vigilant against inflation” or framing the cut as purely “insurance” against a recession will be interpreted as a hawkish signal.

US Dollar Outlook: Cut Priced In, Eyes on Pivot

With the December cut already priced in, the Dollar’s near-term direction will hinge entirely on the tone of Chair Powell’s press conference and the 2026 projections in the Dot Plot.

• Hawkish Cut (Bullish USD): If Powell adopts a cautious tone and the Dot Plot signals only one or two cuts for 2026, the U.S. Dollar is likely to rally, reversing recent losses. The USDX could challenge the 100.00 resistance level.
• Dovish Cut (Bearish USD): If Powell signals a commitment to a broader easing cycle, the USDX is expected to break decisively below the 99.00 psychological support, accelerating downside momentum toward 98.00.

USDX, H4 Chart | Ultima Markets MT5

Technically, the U.S. Dollar is consolidating within the 99.25–98.70 range, hovering near 99.00. A decisive break of this zone—likely triggered by the Fed—would set the stage for the next directional move.

EUR/USD Outlook: Coiled Within the Ascending Channel

Having benefited from recent Dollar weakness, EUR/USD now faces binary risk ahead of the Fed’s decision. The pair is currently trading within an Ascending Channel, which has defined its movement over the past month.

EUR/USD, H4 Chart | Ultima Markets MT5

EUR/USD is consolidating between the 1.1650–1.1600 zone. Its immediate direction will be dictated by the Fed: a dovish cut could reinforce Dollar weakness and support further upside, while a hawkish cut could reverse the trend.

Technical View: Holding above 1.1600 keeps the door open for additional gains toward the top of the ascending channel. A break below this level—especially if accompanied by a hawkish Fed—would likely accelerate downside pressure, strengthening the Dollar and pushing EUR/USD lower.

What to Focus on Today

The market’s attention today is fully on the Fed December decision. A dovish pivot is likely to support risk assets and gold, while a hawkish cut would exert pressure across markets. Key asset outlooks:

• NAS100 & S&P500: Both indices hover near record highs, reflecting cautious optimism. A hawkish cut could trigger downside pressure, particularly as key resistance levels come into play.
• Gold: Price continues to consolidate within the 4,240–4,200 range. A decisive breakout from this zone would set the next directional move. A hawkish Fed outcome poses downside risk for gold.

Disclaimer

Comments, news, research, analysis, price, and all information contained in the article only serve as general information for readers and do not suggest any advice. Ultima Markets has taken reasonable measures to provide up-to-date information, but cannot guarantee accuracy, and may modify without notice. Ultima Markets will not be responsible for any loss incurred due to the application of the information provided.