Market Optimism Grows as Fed Hike Bets Fade

Investors reduce bets on aggressive Fed hikes, stocks rise, and dollar weakens amid shifting economic expectations.

October 5, 2026 One Min Read

POLICY WIRE — Singapore — Global markets opened with optimism on Monday as stock indices climbed and the U.S. dollar retreated from recent peaks, signaling a shift in investor sentiment toward a less aggressive Federal Reserve policy path.

The decline in expectations for a sharp rate increase from the Fed came after softer-than-expected U.S. employment data fueled speculation that the central bank may adopt a more measured approach to tightening monetary policy. Traders now anticipate a roughly 50-50 chance of a quarter-point rate hike at the October meeting, down from over 70% earlier in the day, according to Fed funds futures pricing.

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Bond markets stabilized as the focus shifted from aggressive rate hikes to potential policy adjustments in response to evolving economic conditions. The movement reflects broader uncertainty about the trajectory of inflation and how the Fed will balance its dual mandate of price stability and maximum employment in the coming months.

Reporting by Policy-Wire (PW)

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