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Market reaction to Wednesday’s Fed decision shouldn’t come as much of a surprise. The Fed went ahead with the bigger 50-basis point rate cut, while offering up a balanced communication. And so, the US Dollar sold off and US equities pushed to fresh record highs. read report
Interestingly enough, despite Tuesday’s stronger round of US data, the market is still pricing a 65% chance the Fed goes ahead with a 50-basis point rate cut later today. This view is grounded in the fact that the Fed needs to play catchup with an ongoing deterioration in the US economy. read report
Expectations for a larger 50 basis point rate cut from the Fed continue to rise, now sitting at about 65%. The big takeaway here is that the market has been anything but worried about this prospect. As this expectation has increased, so too has investor risk appetite. read report
The primary focus in financial markets continues to revolve around developments out of the US and how these developments impact the monetary policy outlook at the Fed. And right now, investors continue to press for more rate cuts than less in 2024. read report
In our preview of the ECB decision, we warned the central bank may not be as dovish as the market had been pricing in the lead up, leaving the balance of risk tilted towards a higher Euro. Indeed, this is how things have played out. read report
