Key Highlights

● The dollar was supported by expectations of restrictive Fed policy on Thursday.

● Gold fell about $42.00 to near $4,024.60 an ounce, and silver dropped.

● The ECB also held rates but said further tightening could be considered.

● Friday's Employment Cost index is the next catalyst for dollar direction.

Strong growth data, firmer Inflation and a hawkish Fed gave the US currency a firm footing on Thursday, while dollar-priced metals slid.

Where the dollar found support

The dollar had a clear source of strength on Thursday, October 29. One precious-metals report said in its afternoon update that the currency was "supported by expectations of restrictive Fed policy." No closing level for the dollar index was available for the session, but the direction of the argument was plain.

The logic is straightforward. When investors expect the Federal Reserve to keep rates high, or raise them further, dollar-denominated Assets offer attractive returns, which draws money into the currency.

A hawkish Fed, then hot data

The Fed set the stage on Wednesday. It held rates steady after a September hike, but two policymakers, Governor Lisa Cook and Cleveland Fed President Beth Hammack, dissented in favor of another increase, according to media reports. The statement upgraded the economy to "expanding at a strong pace."

Chair Kevin Warsh said "there's no soft inflation target and no implicit inflation target," according to media reports, and declined to describe financial conditions as tight. "I'm unwilling and unable to call them tight," he said, according to market commentary.

Then Thursday's data arrived. Third-quarter GDP accelerated sharply from the second quarter and beat forecasts, while September PCE inflation heated up, according to market data. One Wealth advisor said, "Today's data strengthens the case for another rate increase in December."

The European contrast

The ECB also held rates on Thursday, according to market data and media reports, while saying further tightening could be considered if inflation persists. For currency traders, the relative path matters: a Fed that hikes again in December while the ECB waits would widen the policy gap in the dollar's favor.

Metals felt the squeeze

A firm dollar and rising rate expectations are a tough combination for gold, which pays no interest and is priced in dollars. One report put gold around $4,024.60 an ounce, down $42.00, and silver around $52.18, down $1.672. Price tickers from other data providers showed smaller declines, with gold near $4,018, so sources differed on the size of the drop.

The explanation was direct: strong GDP and hot PCE support Fed tightening bets, which hurts non-yielding bullion. Copper also edged lower, according to market data.

Bonds told a slightly different story

Interestingly, Treasury yields did not surge alongside the dollar. The 10-year Yield slipped on Thursday, moving just below a closely watched threshold it had reclaimed a day earlier, according to market data. One source said the PCE readings matched estimates, which may have limited the bond market's reaction.

That leaves the dollar's support resting more on expectations about the Fed's next move than on a sudden jump in yields.

On Wall Street, the S&P 500 slipped 23.59 points to 7,720.39 and the Nasdaq Composite fell 365.13 points to 26,184.72 as Alphabet (NASDAQ:GOOGL) posted its worst day since its 2004 IPO. The Dow lost 132.54 points to 52,342.56. The Russell 2000 jumped 28.71 points to 2,859.22, and more than 400 S&P 500 members closed higher.

What to watch

Friday's third-quarter Employment Cost Index is the next catalyst. A hot reading would reinforce the case for restrictive policy and could keep the dollar supported; a soft one could chip away at December hike bets.

Futures pricing favored a December hike, according to media reports, though one source flagged another report that expectations leaned toward a pause. How that disagreement resolves before the December 8–9 meeting will likely shape the dollar's path into year-end. Oil, with Brent at $114.88 and WTI at $102.00, adds another variable, since high energy prices keep inflation worries alive.