The Fed will be hogging the spotlight in trading this week but just be aware that there will also be a couple of other major central bank meetings taking place as well. They won't nearly be as exciting and anticipated as the Fed of course though. As things stand, markets are all waiting with bated breath to see what the Fed will do this week but more importantly how they want to communicate and position themselves for the upcoming decisions in October and December.
Looking at Fed funds futures, traders have fully priced in a 25 bps rate cut for this week with just 4% odds of a 50 bps rate cut. By year-end, traders are pricing in ~69 bps of rate cuts for now.
So, therein lies the risks to any dovish/hawkish communication from the Fed accompanying the rate cut this week.
The Fed decision is going to be the biggest item on the agenda, with it set to impact yields, risk sentiment, the dollar reaction, and broader market mood in the likes of gold especially.
However, just keep in mind that there will be other major central banks also on the economic calendar. Of note, the BOC will be meeting on Wednesday as well and are poised to cut the overnight rate by 25 bps to 2.50%. Traders are pricing in a ~90% probability of that currently.
Then, we'll have the BOE meeting decision on Thursday although the central bank is expected to keep the bank rate unchanged at 4.00%. And lastly, there will be the BOJ meeting decision on Friday in which Ueda & co. is expected to keep rates unchanged as well and maintain the status quo as they try to work an angle for the next rate hike.
