Rate cuts by year-end
- Fed: 18 bps (97% probability of no change at the upcoming meeting)
Rate hikes by year-end
- RBA: 74 bps (80% probability of rate hike at the upcoming meeting)
- RBNZ: 60 bps (95% probability of no change at the upcoming meeting)
- BoJ: 47 bps (91% probability of no change at the upcoming meeting)
- ECB: 45 bps (91% probability of no change at the upcoming meeting)
- BoC: 43 bps (95% probability of no change at the upcoming meeting)
- SNB: 23 bps (95% probability of no change at the upcoming meeting)
- BoE: 19 bps (95% probability of no change at the upcoming meeting)
(You can find last week’s market pricing here.)
Market pricing has been all over the place lately as positive news on the US-Iran war led to dovish repricing, while negative news brought hawkish bets.
At the start of the week, traders pared back the rate hike bets as the record jump in oil prices got unwound on G7 discussions about emergency oil reserves release and then on Trump’s comment to CBS suggesting that the war could be over soon.
The positive expectations didn’t last long though and the hawkish bets returned as reports of Iran deploying mines in the Strait of Hormuz served as a wake-up call that things could still get worse before they get better.
In fact, despite Trump sending messages about a quick end to the war, the strikes and the disruption in the Strait of Hormuz continue. Yesterday, the new Iran’s Supreme Leader in his first ever statement called for national unity and said that the Strait of Hormuz would continue to be closed to pressure Iran’s enemies. He added that they will keep on fighting and attack US bases in the region.
