Tomorrow’s Fed Decision Could Break the Market 💥 Here's the Trade
How to trade the December Fed meeting by focusing on vote splits, dot plot shifts, and Powell’s tone.
Prop Trader Edge
December 09, 2025
How to Trade the December Fed Meeting
The Federal Reserve is gearing up for its final decision of the year, and the market is pricing in an 89 percent chance of a rate cut. But just like every major Fed meeting, the headline isn’t where the real trade is.
The fireworks will come from the vote split, the dot plot, updated economic forecasts, and of course, Fed Chair Jerome Powell’s press conference.
This month, traders are laser focused on two questions:
Will the Fed pause in January
And how many cuts are coming in 2026
In October, the Fed cut 25bp, but the vote was messy. One member wanted a 50bp cut, another wanted no cut at all, and Powell openly acknowledged divisions within the FOMC. Markets interpreted this as a hawkish cut, sending stocks lower and the US dollar sharply higher.
Fed Decision Week. This Is Where The Real Move Happens
Yes, the rate cut is priced in, so do not trade the headline. Trade the surprises.
Here are the 4 landmines that will move stocks, gold, and the US dollar:
Vote split or unanimous
Dot Plot and how many cuts in 2026
Powell presser tone shift
GDP, CPI, and unemployment revisions
Get ready. The fake out comes first, the trend comes second.
Why the Dot Plot Matters
Back in September, the Fed projected two cuts in 2026. That outlook is now the center of the storm.
Will they hold at 2, or shift to 3 cuts signaling a more aggressive easing path
Even one dot adjustment can reprice stocks, gold, yields, and the dollar instantly.
Powell’s Guidance: The Key to January
The market expects the Fed to pause in January.
But will Powell confirm that
Will he push back
Or will he leave the door wide open
His tone on inflation, labor markets, and growth will determine whether traders price in a one off December cut or the beginning of a longer cycle.
Powell’s tone can overshadow the dot plot itself, especially in the first 15 minutes of the press conference when the biggest intraday moves often occur.
Here’s What to Watch
Base Case: 25bp Cut
This is fully priced in. The real trade depends on two things:
• The vote split. Is the committee unified or still divided
• The dot plot. Does 2026 stay at 2 cuts or shift to 3
Surprise Trades
50bp cut → Very dollar bearish, stocks rip higher
No cut → Extremely dollar bullish, stocks hit hard
Dot Plot Trades
2026 stays at 2 cuts → Less dovish, dollar higher, stocks weaker
2026 shifts to 3 cuts → Dollar bearish, stocks higher, gold higher
Expect Market Reactions
Unchanged dot plot or renewed inflation worries →
Dollar rockets higher and stocks struggle
More cuts and weaker growth outlook →
Dollar falls, stocks rally, gold shines
By 3 PM, price direction typically stabilizes and often carries into the next session.
How to Trade It
Proactive
Position ahead of the announcement if you are confident, but reduce risk before 2 PM.
Reactive
Trade the continuation once the first clean post-release move appears. Wait for the real direction after the fake out.
Stand Aside
If volatility is wild, skip the chaos and find cleaner setups in Asia or Europe.
