Rate cuts by year-end
- Fed 2026: 54 bps (73% probability of no change at the upcoming meeting)
- BoE 2026: 61 bps (90% probability of rate cut at the upcoming meeting)
Rate hikes by year-end
- BoC 2026: 25 bps (93% probability of no change at the upcoming meeting)
- ECB 2026: 10 bps (100% probability of no change at the upcoming meeting)
- BoJ 2026: 67 bps (76% probability of rate hike at the upcoming meeting)
- RBA 2026: 40 bps (82% probability of no change at the upcoming meeting)
- RBNZ 2026: 58 bps (97% probability of no change at the upcoming meeting)
- SNB 2026: 6 bps (100% probability of no change at the upcoming meeting)
Looking at the market pricing above, we can see that traders are no longer looking for rate cuts in 2026, on the contrary, they are now expecting rate hikes.
The only two major central banks that are still expected to cut rates a couple of times are the Federal Reserve (Fed) and the Bank of England (BoE).
This is creating a monetary policy divergence that is likely to weigh on the USD and GBP against the other major currencies. But it could also bring nice trading opportunities in case the economic data triggers a hawkish repricing.
Next week, we have the US NFP report on Tuesday and the US CPI on Thursday. It’s going to be a huge week for the market. The focus will be mainly on the NFP report as the Fed continues to place a great deal on the labour market.
If we get strong data, especially on the unemployment rate side, we will likely see a hawkish repricing in interest rate expectations that should give a boost to the US dollar, and weigh on stocks and precious metals.
On the other hand, weak data will support the case for further cuts and keep the trends going, with US dollar likely losing more ground, stocks hitting new highs and precious metals sizzling
