Fed Decision Week: A Comprehensive Guide for Indices, the US Dollar & Gold

The Federal Reserve announced its latest policy decision of 2025 on 29 October 2025, which brought extraordinary significance to the market. The next decision, which is scheduled for this week on Wednesday, 10 December, is another key Fed meeting to keep in mind. The CME FedWatch Tool shows 87% market probability for a 25 basis point rate reduction as of 5 December 2025, although the path to this consensus has been highly unpredictable. What distinguishes this meeting? The October FOMC minutes revealed that policymakers "expressed strongly differing views about what policy decision would most likely be appropriate at the Committee's December meeting." At the October meeting itself, two members dissented in opposite directions, one favouring a larger 50 bps cut, another preferring no change, marking one of the deepest internal splits since 1992.

Goldman Sachs analysts anticipate additional dissents at the December meeting, while Bank of America economists expect at least two, as noted to its clients earlier this week: "The notion that Powell can't credibly commit to a pause could make the hawks on the FOMC dig their heels in."

The market segmentation between traders and investors may create a situation where short-term market fluctuations stem from different numbers and dot plot updates and Powell's conference statements rather than interest rate changes. This, in turn, could mean that  trading strategies which depend on rate reductions to generate potential gains become dangerous when traders apply excessive leverage to make their predictions. In this article, we cover how traders and investors could navigate the markets in light of the final Fed meeting of the year.  

Where Markets Stand Heading Into Fed Week

US Equity Indices

The S&P 500 closed at 6,870.40 on Friday, 5 December 2025, less than 1% below its all-time closing high of 6,890.89 reached on 28 October 2025. The index posted gains in eight of the last nine trading sessions, supported by expectations of monetary easing and lighter-than-expected September PCE data (core PCE at 2.8% year-over-year, down from 2.9% in August).

The Dow Jones Industrial Average ended at 47,954.99 (+0.22%), while the Nasdaq Composite settled at 23,578.13 (+0.31%). (Source: CNBC)

Gold

The gold market closed at $4,198.86 per ounce on 5 December 2025. The precious metal has achieved a 60% year-to-date increase due to central bank acquisitions, reduced Fed interest rates and increased safe-haven investment due to geopolitical tensions. The silver market reached a 100% growth rate in 2025 while creating multiple new price records that surpassed $58 per ounce.

US Dollar

The dollar index (DXY) held below 99 on 5 December, a one-month low, as rate cut expectations weighed on the currency. The greenback has declined approximately 8.5% against major currencies in 2025, its weakest performance for that period in over 50 years, according to J.P. Morgan Asset Management research .

Macro Scenarios for the FOMC Decision

The upcoming Federal Reserve decision could take several broad forms, ranging from a routine rate cut with cautious messaging to a more accommodative shift in policy guidance. In general, analysts may be watching the tone of the statement, the outlook for future policy moves, and any comments related to inflation trends and labour market conditions.

From a market perspective, equity indices may react most to the Fed’s forward guidance rather than the immediate policy action. A supportive tone could encourage risk-on sentiment, while a more guarded approach may result in mixed equity moves. Gold may remain sensitive to changes in real yields and overall market confidence, with safe-haven demand fluctuating around shifts in rate expectations.

In currency markets, major pairs could reflect relative central-bank policy paths. EUR/USD may show direction based on comparative rate expectations between the Fed and the European Central Bank, while USD/JPY could react to any signs of narrowing or widening policy differentials between the US and Japan. Broadly, the US dollar has shown a tendency for short-term volatility around Fed announcements, though actual outcomes will depend on economic data, geopolitical developments, and global risk appetite.

Because recent data flow has been disrupted, policymakers may either lean toward supporting economic momentum or opt to wait for clearer indicators. Whatever the outcome, market movement will ultimately reflect evolving expectations rather than past performance, and there is no guarantee that any particular scenario will unfold.

The Contrarian Angle: It's Not Just About the Cut

The majority of traders believe that risk asset prices will rise when the Fed reduces its interest rate. The Federal Reserve faces internal disagreements which create market uncertainty about future monetary policy decisions.

According to the October FOMC minutes, "Many participants suggested that, under their economic outlooks, it would likely be appropriate to keep the target range unchanged for the rest of the year." Meanwhile, NY Fed President John Williams and Governor Christopher Waller have advocated for easing, citing labour market concerns.

Key insight: Short-term volatility may be driven more by:

• The number of dissents (expect two or more, according to Bank of America)

• Chair Powell's press conference tone

• The dot plot's 2026 rate projections

Still, it’s crucial to note that the above are only projections, not investment advice, and only time will tell what actually lies ahead. 

A Central Bank-Heavy Week: Economic Calendar Highlights

The Fed is not the only central bank announcing this week. Traders may benefit from monitoring these key policy decisions

RBA (Reserve Bank of Australia): The RBA will reveal its interest rate decision on Tuesday, 9 December. The market predicts a rate hold for Tuesday, 9 December, because it expects a 94% chance of no change at 3.60%. The RBA will base its monetary policy decisions on its analysis of Australian inflation data and national economic performance.

The Bank of Canada (BoC) will announce its monetary policy decision on Wednesday, 10 December. The current interest rate stands at 2.25% while market participants predict the BoC will keep its current interest rate. The bank must decide between supporting economic growth and handling the current inflation problems, which impact Canadian economic performance.

The Federal Open Market Committee (FOMC) of the Federal Reserve will make its highly anticipated rate decision on Wednesday, 10 December. The current interest rates between 3.75% and 4.00% face an 87% market expectation for a 25 basis point rate reduction. 

SNB (Swiss National Bank): Rounding out the week, the Swiss National Bank will announce its decision on Thursday, 11 December. With rates currently at 0.00%, the SNB is expected to hold steady. The Swiss central bank's policy stance remains accommodative as it navigates the challenges of maintaining price stability while supporting economic growth.

The economic calendar and price alert tools may enable traders to manage market volatility more effectively during this active trading week.

Preparing for the Fed’s Last Rate Decision of 2025

Step 1: Define Your Watchlist

It may be helpful to keep an eye on the following instruments, among others, before the announcement.

• Equity Indices: Dow Jones, Nasdaq 

• Commodities: Gold, Silver

• Forex: EUR/USD, USD/JPY, GBP/USD

• Rate Proxy: US 10-Year Yield

Step 2: Pre-Define Levels, Not Predictions

Traders may choose to  identify:

• Entry points that correspond to support levels

• Identify profit-taking zones and risk management areas which occur when prices reach specific resistance levels.

• The specific points which would prove my trading thesis incorrect

Step 3: Reduce Event Risk

Implementing risk-management strategies can be helpful in navigating potential volatility.:

Traders can also set price alerts, functioning as crucial market-level notifications.

*Past performance does not reflect future results. The above are only projections and should not be taken as investment advice.