It’s not just juggling the date of the first rate cut either. With Fed officials mulling higher estimates for their neutral interest rate assumption, given the ongoing strength of the economy, rate futures now only see about 150bp of easing for the entire cycle.
Since the end of last year, the assumed “terminal rate” in March 2026 has risen almost 100bps to 3.90%.
A noted Fed dove – Chicago’s Austan Goolsbee – and a recognized hawk – Minneapolis Fed boss Neel Kashkari – both speak later on Monday.
The dollar is pumped up again as a result – chomping at the bit against Japan’s yen again just under 152 yen despite residual fears of Japanese government intervention.
Payrolls aside, part of the problem last week was the jump in oil prices – as building global demand meets supply disruptions and geopolitical worries.
U.S. crude prices hit their highest in almost six months last week above $87 per barrel. Their retreat on Monday to about $86 may calm the horses a bit as Middle East tensions eased after Israel withdrew more soldiers from southern Gaza and committed to fresh talks on a potential ceasefire in the six-month conflict.
Overseas, stocks were generally buoyant on Monday. Japan’s Nikkei outperformed in Asia, while European stocks were higher too.
With the ECB meeting due on Thursday, there’s growing speculation the ECB will cut rates in June even if the Fed doesn’t.
The mood in China was more downbeat, however, as stock benchmarks there fell on Monday. Chinese property developer <0813.HK> tumbled 18.7% after China Construction Bank filed a liquidation petition against it in Hong Kong over its failure to repay loans of HK$1,579.5 million ($201.8 million).
