Not a lot of big changes since last week, but important to see what markets are expecting as we head into this week’s main events.
RBNZ: Markets are pricing in about a 96% chance of a first cut by the bank at their August meeting. After their recent dovish tilt I don’t think there is much forcing them to change much at this week’s meeting. So, might be a place holder.
Fed: The odds of a June cut or hold is at roughly 50/50 as we head into US CPI this week. Odds of a July cut is still at 87% though, so won’t take a very big miss to see markets fully pricing in a July cut again. Looking at things like positioning, I think the simpler trade this week would be a miss in the data (referring to the USD).
BoC: Only 70% chance of a June cut seems too low. Decent deceleration in CPI data, decent miss in labour data, and firms saw a decent reduction in those expecting higher CPI in the Business Outlook survey. I think the BoC has ran out of reasons not to tilt more dovish this week.
ECB: Some participants seem overly excited about the ECB confirming a June cut this week, and some actively positioned for more EUR downside as a result. With a June cut already 100% priced in, I don’t really see the attractiveness of EUR shorts, unless the bank argues for much deeper cuts than what is already priced.
Central bank rate expectations (8 April 2024)