6/3/2019, 6:23 PM (Source: TeleTrader)
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Market bets imply US rate cut odds of 56.9% for July

A reading of the fed fund futures on Monday showed investors have continued to reposition their portfolios with regard to an increase in perceived chances of a loosening in the Federal Reserve's stance. While stocks took a beating in May and macroeconomic updates gave little fuel for optimism, focus remained on the trade wars between the United States and its main partners.

The introduction of import tariffs against China and its retaliation give no indication of a letdown, while the levies which US President Donald Trump announced against Mexico have further worsened sentiment and Treasury yields have plunged in anticipation of a recession.

CME's FedWatch tool pointed to an interest rate cut at the meeting ending on July 31 with a probability of 56.9% as of 12:12 pm ET, of which 9.5% even implied a decrease of half a percentage point or two standard moves. One week before the total came in at only 18.2%. The remaining 43.2% were expectations of no change from the current benchmark range of 2.25% to 2.5%.

Looking at this year's final meeting, set for December 11 and 12, markets penciled in a minimum of three cuts with 44.2%, compared to 34.4% for just two moves lower and 17.19% showing one 0.25-point decrease.

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