Introduction: A Dollar Rally Amid a Quiet Economic Month
The dollar closed October on a firmer note, notching its second-best monthly performance of 2025 as traders grappled with a dearth of compelling US economic data and a stubbornly hawkish Federal Reserve outlook. With official data scarce, markets leaned on liquidity cues, central-bank rhetoric, and cross-asset signals to gauge how high and how long interest rates might stay elevated.
Data Void and Market Framing
Analysts describe October as a “data void” month—a period when limited U.S. statistics leave investors to interpret guidance from Federal Reserve officials and non-U.S. indicators. In such environments, the dollar often finds support as investors seek the safety and liquidity of the world’s primary reserve currency. The Bloomberg Dollar Spot Index posted a third straight daily gain on the final trading day of the month, underscoring the currency’s persistence even as some peers benefited from relief rallies elsewhere.
What Investors Are Watching
Traders focused on several key factors: the trajectory of US inflation, evolving expectations for rate cuts or holds, and global risk sentiment. While inflation cooled from its peaks, core metrics have remained stubborn enough to keep the Federal Reserve’s policy path at the front of investors’ minds. The absence of definitive data released in coming weeks means that policy interpretation will rely heavily on Fed communications, minutes from recent meetings, and the prices of longer-dated Treasuries.
A Hawkish Fed in Focus
The prevailing view among many market participants is that the Fed is not hastily abandoning restrictive policy. While some policymakers have suggested patience, a few officials have signaled that rate cuts are not imminent until inflation remains convincingly tamed. This
