Recently, the US Dollar Index has reignited its strength. On October 11th, the US Dollar Index reached a high near the 103 mark during trading. Since the beginning of October, the US Dollar Index has been climbing steadily, with an increase of over 2%.

Industry insiders analyze that data such as non-farm employment and CPI inflation rate have exceeded expectations, causing a sudden cooling of market expectations for a Federal Reserve rate cut within the year, which has driven the US Dollar Index to rise rapidly. Looking ahead, the Federal Reserve's subsequent rate cut path is full of uncertainties and will still be based on economic data to make decisions. The market expects that the Federal Reserve's future rate cuts may mainly focus on the conventional 25 basis points.

The US Dollar Index has been strengthening for several days. On October 11th, the US Dollar Index remained above the 102 mark, with the highest approaching the 103 mark during trading, and the monthly increase exceeded 2%. "Generally speaking, the US dollar performs weaker in the fourth quarter, but since October, the US dollar has risen rapidly," said Zhou Hao, Chief Economist at Guotai Junan International.

Analysts say that the recent strength of the US Dollar Index is related to the recovery of US economic data and the withdrawal of expectations for a Federal Reserve rate cut. After the Federal Reserve started the rate cut cycle with a "big turn" of 50 basis points in September, the market was quite optimistic about its subsequent rate cut pace, but the recently released data has given the market a "heavy blow."

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On the evening of October 10th Beijing time, data released by the US Bureau of Labor Statistics showed that the US CPI rose by 2.4% year-on-year in September, higher than the expected value of 2.3%; the core CPI rose by 3.3% year-on-year in September, and increased by 0.3% month-on-month, both slightly exceeding expectations. The non-farm employment data released last week also exceeded market expectations, with the unemployment rate unexpectedly falling, showing that the job market still has resilience, and concerns about economic recession have been somewhat alleviated.

Against this backdrop, the market's expectations for a Federal Reserve rate cut within the year have been significantly adjusted, and discussions have begun on whether the Federal Reserve will cut rates in November. The CME FedWatch tool shows that the current market expects the Federal Reserve to cut rates by 25 basis points in November with a probability close to 90%, and the probability of pausing rate cuts is slightly over 10%.

"The release of employment data and inflation data has, in the short term, reversed the market's previous concerns about a US economic recession. Especially against the backdrop of a 50 basis point rate cut in September, the market consensus has shifted from being dovish to a certain extent of repair, which has caused a significant correction in the US dollar and US Treasury bonds after incorporating a strong rate cut expectation," said Wang Xinjie, Chief Investment Strategist at Standard Chartered China Wealth Management.

Regarding the counter-seasonal rise of the US dollar, Zhou Hao analyzed that, on the one hand, the performance of the US economy is significantly better than expected, especially after the release of the September non-farm employment data, the market further reduced expectations for rate cuts within the year; on the other hand, the market had previously over-bet on rate cut trades. At the beginning of rate cut trades, a large accumulation of positions would bring about a rapid decline in interest rates, but such trades, once overly concentrated, could bring a huge counter-effect when the trade reverses.

There is uncertainty in the subsequent rate cut path of the Federal Reserve.A series of recently released data that exceeded expectations implies that the Federal Reserve still needs to perform a "balancing act" between stabilizing inflation and achieving full employment. Against this backdrop, although the Federal Reserve's interest rate cut cycle has already begun, the subsequent path of interest rate cuts is still full of uncertainties.

In fact, after the recent release of economic data, the market has also questioned the Federal Reserve's interest rate cut of 50 basis points in September. After the release of the September non-farm employment data, former U.S. Treasury Secretary Summers bluntly stated that the Federal Reserve's interest rate cut of 50 basis points in September was a mistake.

The minutes of the Federal Open Market Committee meeting in September, which were recently released, showed a huge divide within the Federal Reserve. Although only Federal Reserve Governor Bowman voted against it, according to the minutes, many participants objected to the interest rate cut of 50 basis points during the discussion.

Hu Jie, a professor at the Shanghai Advanced Institute of Finance at Shanghai Jiao Tong University and a former senior economist at the Federal Reserve, believes that the Federal Reserve's decision to start the interest rate cut cycle with 50 basis points in September was slightly radical. He said that, combined with the current data, the Federal Reserve's response to inflation's "last mile" is still tense, but the overall inflationary pressure is moderate, and the job market is still robust. It is expected that the Federal Reserve will most likely cut interest rates by 25 basis points in each of the remaining two interest rate meetings this year.

Bai Xue, Senior Deputy Director of the Research and Development Department of Orient Jincheng, said that the slightly better-than-expected relevant data in the United States in September does not affect the Federal Reserve's continued gradual interest rate cut process, and it is expected that the Federal Reserve will most likely still cut interest rates by 25 basis points: First, the data shows that the risk of a recession in the current U.S. economy is not high, and there is no need for another large interest rate cut; second, looking at the minutes of the September meeting, the 50 basis point preemptive interest rate cut has a large divide within the Federal Reserve. Combining the recent statements of Federal Reserve officials, most are inclined to follow up with a 25 basis point interest rate cut.

Under the expectation of the Federal Reserve's continued interest rate cuts, the U.S. dollar index may still be dominated by a downward trend in the medium to long term. "Under the interest rate cut cycle, the relative weakening of the U.S. dollar is a major trend. However, in this process, the U.S. dollar index may continue to fluctuate with the repeated expectations of interest rate cuts." Hu Jie said that in addition, the subsequent trend of the U.S. dollar index still depends on the relative situation of interest rate spreads and economic fundamentals.