Currency news

Rate cut bets fading

Thanim Islam
Profile
Head of FX Analysis at Equals Money
-
3
min read
Publish date
15/03/24
  • PPI rises in the US adding to USD demand
  • Rate cut bets reducing as a result ahead of Fed meeting next week


Recap

The USD rose to its strongest level in a week after producer price inflation rose more than expected, illustrating that costs are rising. Add this to the rise in consumer price inflation earlier this year, and market pricing on rate cuts from the Fed has reduced back down to only 75bps worth of costs across the year. Initial jobless claims came in lower as well. Retail sales were disappointing, demonstrating that spending momentum is slowing, suggesting we could be in for slower growth in the US.

Today

Market rates

*Daily move - against G10 rates at 7:30am, 15.03.24

** Indicative rates - interbank rates at 7:30am, 15.03.24

Table - 2024-03-15T085947.287

Data points

Table - 2024-03-15T085948.860

Speeches

  • None today.

Our thoughts

The combination of yesterday's US numbers adds to the argument that perhaps the Fed will be in no rush to cut interest rates anytime soon. Nomura bank now forecasts only two rate cuts from the Fed this year, one in July, and another cut in December; this is less than what markets are pricing. A strong performance from US today to mark a good week, or the currency suggests that we could see further strength going into next week's Fed meeting and the Dot Plot. Today sees the one-year expectations for UK inflation, which leads us nicely onto next week's CPI numbers from the UK as well as the BoE meeting. UK numbers this week have disappointed, and anything to suggest inflation is slowing could erode the recent optimism on GBP.

Next week’s BoJ meeting is building up to be a live one, after annual wage hikes rose to 5.28% vs 3.8% a year ago. GBPJPY has been declining in recent weeks, and further declines could be seen should the BoJ elect to lift interest rates out of negative territory.

Chart of the day

The last two months of inflation data from the US is starting to imply that the Fed’s job isn’t quite done yet, and this has been reflected in the money markets, with the amount of rate cuts expected this year reducing 95bps at the start of the week to 75bps (Fed’s current projections). USD has gained as a result this week, and should next week's dot plot show any hesitancy in the amount of rate cuts, I.e. is perceived hawkish, then more gains on the greenback could be seen.

15032024 cotd
Source: Bloomberg Finance L.P.

How we can help

Our team of currency experts are here to help you get more from your money when making international payments. We will work with you to understand your payment needs and offer specialised guidance on the best options available to you. Over the last 17 years we’ve helped over a million customers and last year alone processed over £9.1bn. We’re tried and trusted, and we’re ready to help you.

Have a great day.

International payments made simple
Find out more
About the author
Thanim Islam
Profile
Head of FX Analysis at Equals Money

Still have questions?

This is some text inside of a div block.

Lorem ipsum dolor sit amet, consectetur adipiscing elit. Suspendisse varius enim in eros elementum tristique. Duis cursus, mi quis viverra ornare, eros dolor interdum nulla, ut commodo diam libero vitae erat. Aenean faucibus nibh et justo cursus id rutrum lorem imperdiet. Nunc ut sem vitae risus tristique posuere.

This is some text inside of a div block.

Lorem ipsum dolor sit amet, consectetur adipiscing elit. Suspendisse varius enim in eros elementum tristique. Duis cursus, mi quis viverra ornare, eros dolor interdum nulla, ut commodo diam libero vitae erat. Aenean faucibus nibh et justo cursus id rutrum lorem imperdiet. Nunc ut sem vitae risus tristique posuere.

This is some text inside of a div block.

Lorem ipsum dolor sit amet, consectetur adipiscing elit. Suspendisse varius enim in eros elementum tristique. Duis cursus, mi quis viverra ornare, eros dolor interdum nulla, ut commodo diam libero vitae erat. Aenean faucibus nibh et justo cursus id rutrum lorem imperdiet. Nunc ut sem vitae risus tristique posuere.