Markets closed the week on Friday, October 23, 2026, focused on the Federal Reserve’s policy meeting on October 27 and 28. Futures pricing shows most traders expect the Fed to keep its target range at 3.75% to 4.00%, with only around a one-in-ten chance of a hike. Attention has shifted to the December meeting, where markets still see another increase as likely.
How we got here
On September 16 the Fed raised rates by a quarter point in a unanimous vote, its first increase since July 2023, saying inflation remained elevated. Data released in October sent mixed signals. The jobs report on October 2 showed the economy added only 29,000 jobs in September, with unemployment rising to 4.2%. Then on October 14, consumer price data showed annual inflation at 3.7% in September.
That mix led markets to conclude the Fed would prefer to wait in October without giving up on a hike before year-end, especially after the latest jump in oil prices, which could add fresh inflation pressure.
How the dollar reacted
As bets on an October hike faded during the week, the dollar index fell to a three-week low near 101.5 on October 20, before recovering some ground to settle around 101.7 on Friday. The currency was caught between two opposing forces: the prospect of more tightening supported it, while falling Treasury yields limited its gains.
- Euro: slipped to around $1.12 and headed for a weekly loss, weighed down by renewed concerns about France’s public finances.
- Japanese yen: benefited from safe-haven demand, with the dollar flat near 156.7 yen on Friday.
- Bonds: the 10-year Treasury yield fell below 5% on October 22 for the first time since late September amid a tech-stock sell-off, then returned to around 5% on Friday.
What markets will watch
The October meeting does not include new economic projections or the so-called dot plot, so attention will fall on the wording of the statement and on Fed Chair Kevin Warsh’s press conference, especially any comments on the labor market or on how energy prices affect inflation. A more hawkish tone than expected could support the dollar, while any hint of patience could weigh on it.
Please note: central bank decisions are among the biggest drivers of currency volatility, and prices can move quickly and unpredictably the moment a decision is released. Trading around these events calls for a clear risk plan and is not suitable for every trader.
Why it matters
Weak September jobs data reduced the odds of an October hike, but inflation at 3.7% and rising oil prices keep a December hike on the table. Expectations are therefore balanced between waiting now and tightening later.
Market reaction
The dollar index dropped to a three-week low near 101.5 and then steadied around 101.7 by the end of the week. The euro fell on French fiscal worries, while the yen gained from safe-haven demand.
MIZANOVA view
The decision itself may hold few surprises, but the tone of the statement and press conference could reshape December expectations. Dollar pairs are likely to be more volatile on October 28, which argues for caution with position sizes.