Fed funds futures are slightly firmer and implied rates slightly lower as the market prices in no further rate hikes beginning with the upcoming June 13-14 meeting. And the futures continue to price in some 70 bps in cuts by the end of the year. The slowing in most of the metrics was good news, and especially in the housing components. However, the annual rates remain in the 5% y/y area, more than double the Fed’s 2% target. While this report was not conclusive enough to unambiguously keep the FOMC sidelined next month. Upcoming PCE price data may come in on the hotter side, though the May CPI release, due on June 13, a day before the next policy decision, may slow further.
The ECB may remain on course for further rate hikes, but markets are doubting that the policy divergence versus the Fed can last long, and indeed, officials in Frankfurt have been signalling that the end of the tightening cycle is coming into sight. Cable is holding above the 1.26 mark ahead of Thursday’s BoE meeting, with another 25 bp rate hike expected and markets speculating that the UK central bank will have to keep hiking for longer than the ECB and Fed.
Click here to access our Economic Calendar
Stuart Cowell
Head Market Analyst
Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.
