How have interest rates expectations changed after the tariffs announcement?

Rate cuts by year-end

• Fed: 82 bps (76% probability of no change at the upcoming meeting)
• ECB: 70 bps (90% probability of rate cut at the upcoming meeting)
• BoE: 60 bps (76% probability of rate cut at the upcoming meeting)
• BoC: 57 bps (71% probability of no change at the upcoming meeting)
• RBA: 83 bps (68% probability of rate cut at the upcoming meeting)
• RBNZ: 72 bps (87% probability of rate cut at the upcoming meeting)
• SNB: 16 bps (62% probability of no change at the upcoming meeting)

Rate hikes by year-end

• BoJ: 25 bps (92% probability of no change at the upcoming meeting)

We can see that the market increased the easing bets for all the major central banks on expected slowdown in the global economy. As it’s usually the case, the CHF and JPY got a boost across the board on risk-off flows despite the market scaling back rate hikes expectations for the BoJ and increasing rate cuts expectations for the SNB.

The US Dollar is the big loser here as the easing bets for the Fed get more aggressive and the markets might think that the longer they wait, the higher the probability that the rate cuts will have to be bigger to combat a potential hard landing.

This article was written by Giuseppe Dellamotta at www.forexlive.com.