Markets are now pricing in 68.5% probability of the Fed cutting rates in June versus 57% probability at the end of last week, according to the CME FedWatch tool
The dollar was broadly stable on Monday as data showing easing U.S. prices firmed bets that the Fed could reduce interest rates in June, while the yen hovered near 152 per dollar keeping traders on edge on the threat of intervention.
The personal consumption expenditures (PCE) price index added 0.3% in February, the Commerce Department’s Bureau of Economic Analysis said on Friday.
The report also showed consumer spending increasing by the most in just more than a year last month, underscoring the economy’s resilience. Most markets across the globe were shut on Friday.
Fed Chair Jerome Powell on Friday said the latest U.S. inflation data was “along the lines of what we would like to see,” in comments that tallied with his remarks after the Federal Reserve’s policy meeting last month.
Markets are now pricing in 68.5% probability of the Federal Reserve trimming rates in June vs. 57% probability at the end of last week, according to the CME FedWatch tool. Traders are also pricing in 75 bps of cuts this year.
Citi strategists said the Federal Reserve remains on track to begin trimming rates in June. “If activity holds up, the Fed might deliver three rate cuts this year. But a further softening in labour markets has us expecting five rate cuts this year.”
The euro was up 0.06% at $1.07945, staying near its more-than-one-month low of $1.0769 hit last week. Sterling was at $1.2637, 0.12% higher on the day.
The dollar index, which measures the U.S. currency against six peers, declined 0.038% to 104.42 but stayed near the six-week high of 104.73 it reached last week.
