What are traders saying about the outlook for major central banks now?
For a while there it seemed like the dollar was the hot commodity in the last few months. Inflation seemed stickier and the US economy was faring much better than the rest. Essentially, it was the case of being the cleanest shirt among the dirty laundry.It felt like the BOJ acted too late. As for the ECB, BOE, and BOC, they had economic worries to consider towards the end of last year. In Switzerland, the SNB surprised with an early rate cut. And China worries had dampened the optimism surrounding the aussie and kiwi. But a lot of that has changed over the last one month or so.The BOJ is well, still stuck in the mud as they face a fight against the inflation clock. But Q1 data shows that the situation in the Eurozone, UK, and Canada may not be that bad. Although, all three are facing possible rate cuts going into the summer. However, the difference now is that the Fed may join them a little after that after some question marks about stickier inflation and a hot economy. And in Australia, we're seeing stickier inflation push back hopes of an RBA rate cut later in the year.So, what are traders saying about all this in terms of central bank pricing? Let's take a look at how the rate cut odds are shaping up.US Federal Reserve: First -25 bps in November (September at ~82%); 44 bps of rate cuts for the yearEuropean Central Bank: First -25 bps in June; 55 bps of rate cuts for the yearBank of England: First -25 bps in August (~95%); 55 bps of rate cuts for the yearSwiss National Bank: Second -25 bps in September (June at ~74%); 33 bps of rate cuts for the yearBank of Canada: First -25 bps in July; 54 bps of rate cuts for the yearReserve Bank of Australia: No rate cuts this year; 10 bps priced in onlyReserve Bank of New Zealand: First -25 bps in October (~91%); 45 bps of rate cuts for the yearIf you recall back to December last year and January this year here, it's a massive change to the landscape.Of course, the Bank of Japan is on its own as they are hoping to try and raise rates once again. The can seems to be kicked down the road from July to September now. They might just have missed the boat big time on this one. This article was written by Justin Low at www.forexlive.com.
For a while there it seemed like the dollar was the hot commodity in the last few months. Inflation seemed stickier and the US economy was faring much better than the rest. Essentially, it was the case of being the cleanest shirt among the dirty laundry.
It felt like the BOJ acted too late. As for the ECB, BOE, and BOC, they had economic worries to consider towards the end of last year. In Switzerland, the SNB surprised with an early rate cut. And China worries had dampened the optimism surrounding the aussie and kiwi. But a lot of that has changed over the last one month or so.
The BOJ is well, still stuck in the mud as they face a fight against the inflation clock. But Q1 data shows that the situation in the Eurozone, UK, and Canada may not be that bad. Although, all three are facing possible rate cuts going into the summer. However, the difference now is that the Fed may join them a little after that after some question marks about stickier inflation and a hot economy. And in Australia, we're seeing stickier inflation push back hopes of an RBA rate cut later in the year.
So, what are traders saying about all this in terms of central bank pricing? Let's take a look at how the rate cut odds are shaping up.
- US Federal Reserve: First -25 bps in November (September at ~82%); 44 bps of rate cuts for the year
- European Central Bank: First -25 bps in June; 55 bps of rate cuts for the year
- Bank of England: First -25 bps in August (~95%); 55 bps of rate cuts for the year
- Swiss National Bank: Second -25 bps in September (June at ~74%); 33 bps of rate cuts for the year
- Bank of Canada: First -25 bps in July; 54 bps of rate cuts for the year
- Reserve Bank of Australia: No rate cuts this year; 10 bps priced in only
- Reserve Bank of New Zealand: First -25 bps in October (~91%); 45 bps of rate cuts for the year
If you recall back to December last year and January this year here, it's a massive change to the landscape.
Of course, the Bank of Japan is on its own as they are hoping to try and raise rates once again. The can seems to be kicked down the road from July to September now. They might just have missed the boat big time on this one. This article was written by Justin Low at www.forexlive.com.
