Futures traders reduced bets to the lowest level since October, around 60 basis points in rate cuts this year, LSEG data showed on Monday, amid evidence of continued strength in the U.S. economy.
Ahead of the data, U.S. interest rate futures set the odds of the first cut occurring in June at about 60%, up from 51% on Monday, according to CME Group’s FedWatch tool, although the possibility of a hold has bumped up to 40%.
A solid CPI number will likely have markets pricing out a June cut, which could see the dollar rising sharply, and the risk that Japan will need to intervene to defend its yen.
The euro was steady as the European Central Bank meeting on Thursday fast approaches. The ECB is also expected to hold rates this week, although traders betting the central bank will start cutting in June will be looking for signals from policymakers.
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