How have interest rates expectations changed after the NFP report?

[Ben Graham]

Rate cuts by year-end

• Fed: 70 bps (91% probability of rate cut at the upcoming meeting; the rest for a 50 bps cut)
• ECB: 8 bps (99% probability of no change at the upcoming meeting)
• BoE: 12 bps (98% probability of no change at the upcoming meeting)
• BoC: 42 bps (89% probability of rate cut at the upcoming meeting)
• RBA: 30 bps (81% probability of no change at the upcoming meeting)
• RBNZ: 38 bps (91% probability of rate cut at the upcoming meeting)
• SNB: 7 bps (91% probability of no change at the upcoming meeting)

Rate hikes by year-end

• BoJ: 12 bps (97% probability of no change at the upcoming meeting)

The biggest changes in interest rates expectations happened on Friday as we got the US and Canadian jobs data. Both were softer than expected although the Canadian one was worse.

The market quickly priced in a third cut for the Fed by year-end (70 bps) and a second rate cut for the BoC (42 bps). Moreover, given some expectations of the Fed being potentially late, the market started to price in also some chances of a 50 bps cut in September. Much like the insurance cut we got in 2024.

That might depend on the US CPI report on Thursday though. Soft data could give the Fed more conviction to start with a 50 bps cut and then see how things evolve in the next months.

This article was written by Giuseppe Dellamotta at investinglive.com.