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January 14th - A growing number of options traders are ruling out a 2026 Federal Reserve rate cut and instead betting that the Fed will keep rates unchanged throughout the year. This trend can be traced back to at least last Friday, when US employment data showed an unexpected drop in the unemployment rate. Market pricing suggests this virtually eliminated the possibility of a Fed rate cut this month, prompting more traders to postpone their expectations for rate cuts in the coming months. David Robin, interest rate strategist at TJM Institutional Services, noted, "From a data perspective, the probability of the Fed keeping rates unchanged until at least March has increased, and the likelihood of stable rates increases with each meeting." Recent options flows for the covered overnight funding rate, which is closely linked to the Feds short-term benchmark rate, have sent a more hawkish signal. New options positions are primarily concentrated in March and June contracts to hedge against a continued delay in the Feds next rate cut. Other positions targeting longer-term contracts are expected to profit from the Feds stance of keeping rates unchanged throughout the year. Robin stated that regardless of whether the market believes the Fed will hold rates steady, these trades are low-cost, and as a prudent risk manager, you would want to hold these positions.On January 14th, according to futures market news: 1. WTI crude oil futures trading volume was 1,698,750 lots, an increase of 633,450 lots from the previous trading day. Open interest was 2,018,272 lots, an increase of 19,747 lots from the previous trading day. 2. Brent crude oil futures trading volume was 322,400 lots, an increase of 118,072 lots from the previous trading day. Open interest was 231,565 lots, an increase of 869 lots from the previous trading day. 3. Natural gas futures trading volume was 620,866 lots, a decrease of 256,129 lots from the previous trading day. Open interest was 1,635,714 lots, a decrease of 7,021 lots from the previous trading day.ECB Governing Council member Kazak: The uncertainty and risks of nonlinear shocks remain high, and the outlook faces risks from two aspects.ECB Governing Council member Kazak: The ECB is currently in a good position.ECB Governing Council member Kazak: The Fed’s actions are worrying.

As the BoJ ponders a YCC expansion, EUR/JPY continues to decline, falling below 142.60

Alina Haynes

Apr 06, 2023 11:52

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After plunging below 142.60 during the Asian trading session, the EUR/JPY pair's three-day losing trend was extended. Renewed rumors of an expansion of the Bank of Japan's (BoJ) Yield Curve Control (YCC) are exerting immense pressure on the cross.

 

The Japanese economy is experiencing gradual wage growth, and inflation is expected to respond to recent increases in crude oil prices. Analysts at Wells Fargo believe the BoJ will take advantage of a tactical opportunity to further modify its policy settings in the fourth quarter of 2022, and are inclined toward a meeting in October. They added that this timeframe is optimal for a smooth policy adjustment, as monetary easing from the Federal Reserve (Fed) and other major central banks should alleviate yield pressure.

 

In particular, the Bank of Japan (BoJ) will raise the target yield for 10-year Japanese government bonds (JGBs) from 0% to 0.25% and increase the tolerance interval surrounding this target to +/- 75 basis points.

 

Accelerating PMIs in the Eurozone provide support for the European Central Bank's sustained rate hikes. (ECB). S&P Global reported a Composite PMI of 53.7 on Wednesday, which was higher than the previous release of 52.0 but below expectations of 54.1, the highest level in the past ten months.

 

According to Reuters, S&P Global issued the following statement: "Manufacturing production increased slightly, but the service sector had the greatest impact on March's accelerated growth."

 

Wednesday, ECB policymaker Boris Vuji stated regarding interest rate forecasts, "The majority of the rate-hiking cycle has passed." He added, "We may require additional rate increases to address core inflation."

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