# Fed Divided: Dollar Flattens on Rate-Cut Signals

The dollar staged a brief rally to 5.5-month highs Friday before reversing course—a microcosm of the Fed's own internal conflict. While Boston's Susan Collins and Dallas's Lorie Logan pushed for holding steady, New York's John Williams dropped dovish breadcrumbs about rate cuts "in the near term." Markets immediately repriced: Fed funds futures jumped from 35% to 66% odds of a December cut. The result? DXY barely budged, +0.03%.

The real headline was consumer sentiment: University of Michigan index revised up +0.7 to 51.0, beating expectations. Even better—inflation expectations took a breather. 1-year expectations fell to 4.5% (from 4.7%), while 5-10 year dropped to 3.4% (from 3.6%). Manufacturing PMI stayed tepid at 51.9, down -0.6.

**Spillover effects:**
- **EUR/USD** crumbled -0.15% to 2-week lows as Eurozone manufacturing contracted unexpectedly (PMI 49.7, worst in 5 months)
- **USD/JPY** got hit -0.67% after Japan's finance minister threatened FX intervention + upside trade data (exports +3.6% y/y)
- **Gold** +0.48%, **silver** -0.77%—risk-off bid competed with dollar strength

Central banks kept buying the dip: PBOC gold reserves hit 74.09M oz in October (12 consecutive months of accumulation). Global CB purchases hit 220 MT in Q3, up 28% from Q2.

The takeaway: Markets are now pricing a December rate cut as *probable*, not fringe. That's a massive repricing from 48 hours ago.