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Figure Heloc 
Rate cuts by year-endFed: 7 bps (98% probability of no change at the next meeting)Rate hikes by year-endRBNZ: 74 bps (70% probability of no change at the next meeting)ECB: 59 bps (60% probability of no change at the next meeting)RBA: 50 bps (60% probability of rate hike at the next meeting)BoJ: 50 bps (51% probability of rate hike at the next meeting)BoE: 40 bps (78% probability of no change at the next meeting)BoC: 35 bps (93% probability of no change at the next meeting)SNB: 21 bps (83% probability of no change at the next meeting)(You can find last week’s market pricing here)We can see we got a dovish repricing across the board as inflation worries eased on expectations that the end of the war would bring energy prices back down.The only central bank where rate hike expectations actually increased was the RBNZ. That’s because the RBNZ released its monetary policy decision the same day Trump announced the ceasefire.The central bank clearly shifted to a hawkish stance as they added a new paragraph in the statement saying that “decisive and timely increases in the OCR would be required” if core inflation, wage growth and inflation expectations do not remain contained. Moreover, Governor Breman acknowledged that the committee discussed raising the OCR already at this week’s meeting although that didn’t find a strong consensus. She has also added that the neutral rate sits around 3.00% which is 75 bps above the current 2.25% rate, so that’s why traders increased the expected tightening to 75 bps by year-end. It goes without saying that everything hinges on US-Iran negotiations now. Iran is shooting for the stars with its 10-point plan, so there’s going to be some noise tomorrow and likely another round/s of negotiations in the next weeks.
This article was written by Giuseppe Dellamotta at investinglive.com.
💡 DMK Insight
With the Fed signaling a strong likelihood of no rate changes, traders need to recalibrate their strategies. The current probabilities suggest a stable environment for the USD, which could lead to a stronger dollar against other currencies, particularly if the RBA follows through with a rate hike. This divergence in monetary policy could create volatility in forex pairs like AUD/USD, where traders should watch for key resistance levels. Additionally, the ECB’s potential inaction might keep the euro under pressure, especially if economic indicators from the Eurozone continue to disappoint. Keep an eye on economic data releases this week, as they could shift these probabilities and impact market sentiment significantly. However, it’s worth noting that while the Fed’s stance appears dovish, any unexpected economic data could lead to a sudden shift in market expectations. Traders should be prepared for potential whipsaws, especially around key economic announcements. Monitoring the 1.05 level in EUR/USD could provide insights into market sentiment as we approach these critical events.
📮 Takeaway
Watch for EUR/USD around the 1.05 level this week; any shifts in economic data could trigger significant volatility.
