Powell’s Hawkish Shift Catches Markets Off Guard

As many anticipated, the US Federal Reserve cut interest rates by 25 basis points, a move markets had priced in well in advance. However, Jerome Powell’s press conference still brought volatility.

Interestingly, as the US session began, Bitcoin started to fall, dropping below $111,000 ahead of the decision. The rest of the crypto space followed, with altcoins also sliding. Traditional indices stayed sideways into the announcement. During the presser, Powell struck a surprisingly hawkish tone and cooled expectations for a rate cut in December.

Powell confirmed that quantitative tightening would end, which is a bullish signal for risk-on assets, but followed up by stating, “a further reduction in the policy rate at the December meeting is not a foregone conclusion. Far from it, policy is not on a preset course.” Risk-on markets pulled back on the comments, while the US dollar and treasury yields rallied as investors moved into risk-off positioning. Gold extended its correction, now logging six red days out of the last seven. Despite that, NVIDIA still pushed higher and became the first company to reach a $5 trillion market cap.

The odds of a 25bps cut at the December meeting now sit at 67.8%, with a 32.2% chance of no cut at all, according to CME Group’s FedWatch. This is a sharp reversal from the day before, when markets were still debating whether December would bring a 50bps or 25bps cut.

Following the hawkish tone and risk-off move, Bitcoin remains below $112,000 and Ethereum has also stayed red. The altcoin market, however, is green on the day, led once again by Hyperliquid and Hedera. HYPE is up another 3% and HBAR has gained over 5% for the second straight day. October has turned red again, but with November approaching, the market is still in a strong position to set up for another record-breaking month.

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