Rate cuts by year-end

• Fed: 102 bps (61% probability of no change at the upcoming meeting)
• ECB: 72 bps (75% probability of rate cut at the upcoming meeting)
• BoE: 75 bps (86% probability of rate cut at the upcoming meeting)
• BoC: 69 bps (55% probability of rate cut at the upcoming meeting)
• RBA: 99 bps (88% probability of rate cut at the upcoming meeting)
• RBNZ: 89 bps (97% probability of rate cut at the upcoming meeting)
• SNB: 21 bps (56% probability of no change at the upcoming meeting)

Rate hikes by year-end

• BoJ: 7 bps (99% probability of no change at the upcoming meeting)

Compared to yesterday’s update here, we can see that traders are betting aggressively on rate cuts amid the recessionary fears triggered by the worse than expected tariffs announcement. Traders don’t even expect a rate hike from the BoJ anymore.

The bets on Fed rate cuts have been more aggressive compared to the other central banks which saw the US Dollar selling off hard almost across the board.

Today we have two key events: the US NFP report and Fed Chair Powell. The employment data is old news, so it would have a bigger impact if it’s weak because a good report will likely be faded given the new expectations following the tariffs announcement.

Powell, on the other hand, will have a forward looking impact. If he remains neutral, the markets will take that as bad news because the Fed is not coming in support. Conversely, if he focuses more on growth risks and opens the door for easing despite higher inflation and inflation expectations, then we should see a relief rally in risk assets and a top in rate cuts bets.

This article was written by Giuseppe Dellamotta at www.forexlive.com.