DBG Markets: Market Report for Dec 10, 2025

The “Hawkish Cut” Risk: Fed Decision & Dot Plot in Focus

Fed Outlook: A "Hawkish Cut" or "Dovish Pivot"？

The Federal Reserve will deliver its final policy decision of 2025 tomorrow morning (3:00 AM GMT+8 / 2:00 PM ET), and market attention is sharply focused on the outcome. While a 25-bps rate cut is widely expected, the market-moving factor lies in the details of the statement and the Feds updated projections.

· Markets are pricing in roughly a 90% probability of a 25-bps cut, which would bring the policy rate to 3.50%–3.75%—a move interpreted as an “insurance cut” to support a cooling labor market.

· The Real Risk (Dot Plot): The spotlight is on the 2026 SEP, particularly the dot plot, inflation forecasts, and labor market projections.

In simple terms, markets want to know whether the Fed is delivering a “hawkish cut” or a “dovish pivot” that signals a genuine resumption of the easing cycle.

If the median dot plot shows only one or two cuts in 2026—reflecting sticky inflation—this would amount to a Hawkish Cut, likely disappointing investors who expect more aggressive easing. Such an outcome would support the U.S. Dollar and pressure risk assets. Conversely, a dovish pivot would weaken the dollar and may drive a broader risk-on response.

Separately, President Trump has publicly stated that support for “immediate, substantial rate cuts” is a key criterion for choosing the next Fed Chair, with Kevin Hassett being a leading candidate. Powell will likely be asked about this political pressure but is expected to reaffirm the Feds independence, limiting the impact of politics on policy direction.

US Dollar Index: Battle for 99.00

The dollar remains under pressure but is holding a critical support area ahead of the event.

The U.S. Dollar Index continues to trade just above the 99.00 psychological level, attempting a mild rebound as traders position for the Fed. Despite this, the near-term outlook remains uncertain.

USD Index, H4 Chart

Technically, the focus is centered on the 99.25 – 98.80 support zone. A break on either side of this range will likely dictate the post-FOMC direction, setting the tone for the dollar through the end of 2025 and potentially into 2026.

The Dollar & Fed Outlook:

· Scenario A (Hawkish Cut): If the Dot Plot signals a slower pace of cuts in 2026, the Dollar Index could stage a sharp relief rally, targeting 99.60 and potentially reclaiming 100.00.

· Scenario B (Dovish Pivot): If Powell emphasizes labor market risks over inflation, the DXY will likely break 99.00, opening the door for a slide toward the next lows.

Gold: Pending Breakout in Place

Gold experienced some pre-event profit-taking yesterday but remains structurally bullish, with prices quickly reclaiming the 4200 level.

XAU/USD, H4 Chart

The broader technical setup remains constructive. However, price action is still consolidating near the upper end of the range, making this a cautious bullish environment rather than a clean breakout.

The bulls now require a dovish spark from the Fed—the key catalyst at this stage—to break out of the recent consolidation. A decisive move above 4240 would likely open the path for gold to retest its all-time highs.

On the other hand, a hawkish cut could trigger a deeper pullback toward the immediate support zone near 4110, with room for further downside if that level gives way. Until then, gold maintains a range-trading, bullish-leaning outlook.

S&P 500: Caution near All-Time Highs

The equity market is pausing near record highs, cautious of a potential “buy the rumor, sell the news” reaction. The S&P 500 is consolidating around 6,900, as investors await clarity on 2026 rate projections.

US500 (S&P500), Daily Chart

With the index hovering near all-time highs, market sentiment remains cautiously optimistic.

Outlook:

· A dovish surprise from the Fed could fuel a Santa rally, pushing the S&P 500 toward new record highs.

· A hawkish cut or mixed signals could limit upside potential, triggering a pullback from the 6,900-resistance.

In short, for the S&P 500 to break decisively higher at current sensitive level, a strong dovish catalyst is needed to sustain the rally. Conversely, any cautious or hawkish messaging from the Fed could ignite a “sell the news” reaction.

Bottom Line: Fed May Set the Tone

Tonight‘s Fed decision will set the tone for USD, gold, and equities into the end of 2025 and early 2026. Traders are watching closely for guidance on the pace of cuts, Dot Plot projections, and Powell’s commentary, with risk-reward dynamics hinging on whether the Fed delivers a hawkish cut or a dovish pivot.

In general, a dovish pivot will ignite a “Santa Rally” for investors, triggering a rally in risk assets and gold, while potentially sending the dollar lower. Conversely, a hawkish cut could limit upside for risk assets and support the USD.

Still, dont miss the possibility that if the Fed delivers a more neutral outlook, the market may extend a further sideways period.