FX Graph

Traders see 100% chance the Fed will cut rates in July

Fed July rate cut chances

Following the Federal Reserve’s monetary decision on Wednesday, it seems that there is a wide consensus among market participants that the Fed would starting cutting interest rates from next month.

The federal funds future contracts are showing a 100% chance of a rate reduction by the Fed when they meet on July 31, where 70 percent pointed out a 25-basis points slash while 30 percent predicted a more aggressive slash by 50 basis points.  


The Federal Reserve decided to keep the benchmark interest rate in a target range of 2.25% to 2.5% on Wednesday, while hinted to willingness to cut interest rates if needed.

The dollar fell on Thursday and is heading toward the biggest drop over two days since the beginning of this year. The dollar index, which measures the performance of the U.S. currency in front of a basket of competing currencies, fell 0.39 percent to 96.208, as of 10:29 GMT.

The issue for more facilitative policy has been enhanced, said Fed Chairman Jerome Powell at a press conference on Wednesday, adding that policymakers were concerned about some recent economic developments.

Earlier today, Asian shares finished higher, with the Nikkei(N225) Japanese stock index closing at its highest level in six weeks on Thursday, as it edged up 0.6 percent to 21462.86 points, continuing its gains after rising 1.7 percent on Wednesday.

It is worthwhile to mention that prior to the Fed's announcement on Wednesday, traders were pricing in a 16 percent chance the Fed would keep interest rates unchanged in July, whilst a 65 percent chance of having one rate cut and a 19 percent probability of two rate cuts next month.

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