Futures are fully priced for a quarter-point easing and even imply a 12% probability of 50 bps, and have 68 bps of easing priced in by Christmas
Asian shares bounced on Monday into a week packed with earnings and a trio of central bank meetings that could see the US and UK open the door to easing, while Japan might lift borrowing costs.
Oil prices rose on concerns of a widening conflict in the Middle East.
Also due this week is the U.S. jobs report for July, closely watched surveys on U.S. and global manufacturing, along with Eurozone GDP and inflation data.
The U.S. Treasury will outline how much bonds it plans to sell for the quarter, while China’s politburo meeting could unveil more stimulus following surprise rate cuts last week.
After a benign June inflation report, markets are betting the Fed will lay the groundwork for a September rate cut at its policy meeting on Wednesday.
Futures are fully priced for a quarter-point easing and even imply a 12% probability of 50 bps, and have 68 bps of easing priced in by Christmas.
The FOMC is set to hold steady but is likely to revise its statement to hint that a cut at the following meeting in September has become more likely, wrote analysts at Goldman Sachs in a note.
We now see the risks to the Fed path as tilted slightly to the downside of our baseline of quarterly rate reductions, though not quite as much as market pricing implies, they added.
The BoJ also meets Wednesday and markets imply a 70% probability it will raise rates by 10 bps to 0.2%, with some chance it could move by 15 bps.
Investors are less sure whether the Bank of England will ease at its meeting on Thursday, with futures showing a 51% chance of a reduction to 5%.
