Rate cuts by year-end

Fed: 100 bps (91% probability of no change at the upcoming meeting)
ECB: 64 bps (86% probability of rate cut at the upcoming meeting)
BoE: 96 bps (96% probability of rate cut at the upcoming meeting)
BoC: 53 bps (55% probability of rate cut at the upcoming meeting)
RBA: 118 bps (92% probability of rate cut at the upcoming meeting)
RBNZ: 78 bps (75% probability of rate cut at the upcoming meeting)
SNB: 33 bps (81% probability of rate cut at the upcoming meeting)

Rate hikes by year-end

BoJ: 10 bps (97% probability of no change at the upcoming meeting)

We can see that since the last update, the biggest moves in interest rate expectations happened with the Fed and the BoJ. The market increased the easing bets for the Fed following the weaker than expected US Q1 GDP yesterday. and decreased the tightening bets for the BoJ following the dovish policy decision and Governor Ueda’s comments.

These expectations hinge on the trade deals though. If the details of the first trade deal show that the average tariff rate will be at or below 10%, then we can expect the market to reprice the expectations on a more hawkish side. Markets tend to overshoot expectations and that’s what provides traders with mean reversion opportunities.

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