Rate cuts by year-end
- Fed: 58 bps (90% probability of no change at the upcoming meeting)
- BoE: 48 bps (64% probability of rate cut at the upcoming meeting)
- ECB: 8 bps (98% probability of no change at the upcoming meeting)
- SNB: 7 bps (93% probability of no change at the upcoming meeting)
Rate hikes by year-end
- BoC: 1 bps (93% probability of no change at the upcoming meeting)
- BoJ: 59 bps (76% probability of no change at the upcoming meeting)
- RBA: 39 bps (77% probability of no change at the upcoming meeting)
- RBNZ: 40 bps (99% probability of no change at the upcoming meeting)
You can find last week’s market pricing here.
It’s been a pretty lacklustre week in terms of data releases and newsflow with the US NFP and US CPI reports being the only highlights. We got a hot NFP report with the headline number beating expectations by a big margin and the unemployment rate falling further despite an increase in the participation rate.
The initial reaction was hawkish with traders paring back rate cut bets from 60 bps to 53 bps after the release. The pricing then increased back to 58 bps following a selloff in the stock market yesterday. It’s unclear what triggered the weakness but the curious thing is that many other assets showed similar price action around the same time.
Today, we wrap up the week with the US CPI report. If we get an in-line or soft CPI, there shouldn’t be much change in terms of market pricing as the two rate cuts expected by the market are already above the Fed’s projection. On the other hand, a hot report will likely trigger a stronger hawkish reaction following the hot NFP report on Wednesday. In such a case, we could see the market pricing converging with the Fed’s projection.
This article was written by Giuseppe Dellamotta at investinglive.com.
