🚨 September rate-hike expectations suddenly cool off.
The latest intraday pricing shows the probability of a 25-basis-point rate hike by the Fed in September has fallen from nearly 70% yesterday to about 59%. In just one day, it dropped by roughly 11 percentage points, triggering a caution.
This time, it’s not the market suddenly turning dovish. Mainly, there are two things. First, U.S. August ADP private payrolls rose by only 38,000, below expectations, indicating that companies are indeed slowing down hiring. Second, New York Fed President John Williams said that while inflation is still too high, there’s currently no need to rush into another rate increase—later on, they’ll still have to follow the data.
After the news broke, U.S. Treasury yields and the dollar both retreated. The market quickly unwound some hawkish bets. Recently, this probability line has been quite dramatic: 35%→57%→64%→nearly 70%→about 59%. A few days ago, it was pricing as if a hike was all but certain on the board—now it’s back in the mid-to-high 50% range.
Next, what will truly determine the direction is nonfarm payrolls. If employment stays weak, the rate-hike probability could drift toward 50% or even around 40%. If nonfarm payrolls regain strength, the 60%–70% rate-hike trades could return at any time.
So don’t rush to bet on the 59%—this is only intraday pricing. After the nonfarm data comes out, that’s when the real showdown happens.
Do you think rate-hike expectations will keep cooling, or will they heat up again?
The latest intraday pricing shows the probability of a 25-basis-point rate hike by the Fed in September has fallen from nearly 70% yesterday to about 59%. In just one day, it dropped by roughly 11 percentage points, triggering a caution.
This time, it’s not the market suddenly turning dovish. Mainly, there are two things. First, U.S. August ADP private payrolls rose by only 38,000, below expectations, indicating that companies are indeed slowing down hiring. Second, New York Fed President John Williams said that while inflation is still too high, there’s currently no need to rush into another rate increase—later on, they’ll still have to follow the data.
After the news broke, U.S. Treasury yields and the dollar both retreated. The market quickly unwound some hawkish bets. Recently, this probability line has been quite dramatic: 35%→57%→64%→nearly 70%→about 59%. A few days ago, it was pricing as if a hike was all but certain on the board—now it’s back in the mid-to-high 50% range.
Next, what will truly determine the direction is nonfarm payrolls. If employment stays weak, the rate-hike probability could drift toward 50% or even around 40%. If nonfarm payrolls regain strength, the 60%–70% rate-hike trades could return at any time.
So don’t rush to bet on the 59%—this is only intraday pricing. After the nonfarm data comes out, that’s when the real showdown happens.
Do you think rate-hike expectations will keep cooling, or will they heat up again?
