The Fed decided six weeks ago that it's time to loosen the screws on the economy. The bond market, and election year rhetoric, aren't cooperating. Why it matters: For now, financial markets have settled on a new reality that America's political backdrop may keep interest rates higher than Fed officials anticipated when they commenced their rate-cutting campaign in September.

The receding expectations of aggressive easing have spurred a more than 4% rally in the US dollar, as measured by its index against a basket of six major currencies. However, Fed rate cut bets have not been the only factor pushing up the dollar.

Gold prices held their ground on Tuesday as investors held back from taking big positions ahead of the U.S. presidential election and the Federal Reserve policy meeting later this week. Spot gold was steady at $2,