Will Investors Increase Their Fed Rate Cut Bets?
As investors shift towards more Fed rate cut bets, the financial market saw some turbulence in the first half of the week. However, there was a slight recovery on Thursday.
Following last week’s softer-than-expected data, Fed officials, including Chair Powell, expressed confidence that inflation would remain low. Powell mentioned that they are not waiting for inflation to hit 2% before implementing rate cuts.
With the employment report for June revealing weaknesses in the labor market, market participants are now pricing in a September rate cut and a 50% chance for a third cut this year. The upcoming US GDP estimate release next Thursday will put these bets to the test.
Overall, the US economy is expected to show a modest acceleration in the GDP growth rate, but there are concerns about the core CPI slowdown affecting the inflation rate.
Investors will closely watch the preliminary PMIs on Wednesday to gauge economic improvement and its impact on future rate cuts.
How Could the PMIs Impact ECB and BoE Policy Paths?
On the European side, the ECB is considering a rate cut in September, while the probability of a rate cut by the BoE in August has decreased. The upcoming PMIs will provide more insight into the economic conditions in these regions.
If the PMIs show economic improvement and stable prices, the probability of rate cuts may decrease, affecting the value of the euro and pound against other currencies.
BoC to Deliver a Back-to-Back Rate Cut
The Bank of Canada is expected to announce a back-to-back rate cut following easing inflation and sluggish economic growth. The Canadian dollar may face pressure if the easing cycle continues.
Keep an eye on Japan’s inflation data and tech giants’ earnings reports for further market insights.
Analysis:
The financial markets are currently influenced by investors’ expectations of Fed rate cuts, global economic conditions, and central bank policies. Understanding these factors can help individuals make informed decisions about their investments and financial planning. It is essential to stay updated on economic indicators, such as PMIs and GDP growth rates, to anticipate market trends and potential risks. By staying informed and analyzing the implications of these events, individuals can protect their finances and capitalize on investment opportunities.