Traders’ expectations shifted sharply toward a 50 basis point rate cut by the Fed, destabilizing markets.
The global dollar fell to its lowest level in almost nine months against the Japanese Yen after press reports again fueled speculation that the Federal Reserve (Fed) could implement a huge cut in interest rates of 50 basis points at its monetary policy meeting next week
He dollar index, The index, which measures the greenback’s performance against a basket of six other major currencies, fell 0.08% to 101.08, after traders raised bets on a 50 basis point cut by the Fed. Fed at the meeting of the Federal Open Market Committee (FOMC) next week.
In afternoon operations, the dollar fell 0.66% to 140.855 yen, after earlier falling to 140.285, its lowest level since Dec. 28. For the week, it fell 1%. Meanwhile, the euro rose 0.08% against the dollar to $1.1083.
Expectations are set on the Fed’s decision on rates
Analysts said reports in the Wall Street Journal and Financial Times late on Thursday saying a 50-basis-point rate cut was still an option, and comments by a former Fed official advocating a big cut, prompted a shift in market expectations.
The market of rate futures The US central bank has priced in a 51% chance that the Fed will ease by 50 basis points at the end of its two-day meeting on Wednesday, up from 15% in the previous session.
Futures traders have also priced in 117 basis points of cuts for 2024, up from 107 basis points in the previous session.
Media reports introduced into the market the probability of a 50 basis point cut after new data from inflation would reinforce expectations of a 25 basis point cut by the Fed, he said Brad Bechtel, global head of currencies at Jefferies in New York.
“So we’re seeing a bit of a dismantling of those positions that were looking for 25 basis points,” he said.
Source: Ambito
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