Traders still bet on Fed rate cut despite ease in trade tensions

  • by Ahmed Mamdouh
  • June 11, 2019, 18:10 AM
  • 165 Views
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Despite the ease in trade tensions between the United States and Mexico, traders still bet the Federal Reserve would cut interest rates in within months.

There is 90 percent chance the Fed would slash their funds rate by 25 basis points by the end of July, according to the Fed funds futures contracts for August.

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The implied yield on August 2019 fed funds futures is for a rate cut to 2.15 percent after July’s policy meeting, compared to the current target range of 2.25% to 2.5% (2.375% average).

By the end of 2019, the Fed would have slashed the borrowing cost to 1.775 percent average. This is based on the implied yield on January 2020 fed funds futures.  

While the easing trade tensions between the U.S. and Mexico pushed the slashed rate little bit higher, traders are betting on the escalating trade tensions and slowdown in global growth.

The probability the Fed would cut rates by 25 basis points during their June policy meeting fell to 19 percent on Monday from 25 percent late on Friday, CME Group's FedWatch showed.

Ahmed Mamdouh

Ahmed Mamdouh is the head of the English Fundamental Analysis at Ofeed.com, with 11 years of experience in the financial markets. Mamdouh holds a Master’s Degree in Economics from the American University in Cairo and a Bachelor Degree in Economics from the Faculty of Economics and Political Science, Cairo University.

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