The US dollar rallied as expectations of a December rate cut receded

US Dollar Index (DXY)

The U.S. dollar is on the rise today, supported by a decline in market expectations for the Federal Reserve to cut interest rates at its December meeting.

The rally comes amid a lack of economic data available to the central bank ahead of the meeting.

Interest rate expectations fall due to lack of data

The full October nonfarm payrolls (NFP) report was not released due to the government shutdown, leaving the Fed without one of the most important indicators it relies on to assess the strength of the labor market.

The November data is expected to include part of the October numbers, but it will be released after the Fed's Dec. 9-10 meeting, reducing the data available for policymakers to make a rate cut decision. 

Because of this lack of data, market expectations are pointing towards a rate hike rather than a rate cut, which could have a positive impact on the dollar's performance in the coming period.

Fed meeting minutes bolster expectations of stabilization

Minutes of the October meeting released on Wednesday showed that a number of Fed officials are leaning toward not cutting interest rates in December, noting that more data should be monitored before taking any new steps in monetary policy.

This reinforced the dollar's strength and pushed the Dollar Index (DXY) higher amid expectations that the positive momentum will continue.

Impact on Gold and Silver

As the dollar rises, gold and silver prices may come under downward corrective pressure, especially as the prospects of interest rate hikes increase, reducing the attractiveness of non-yielding assets such as gold.

In the end, markets seem to be pricing in a no interest rate cut scenario in December, giving the dollar an upward push that could continue in the coming weeks.

Conversely, we could see deeper downward corrections in precious metals prices as the US currency continues to strengthen.