Markets expect Fed to cut rates as early as March

Markets expect Fed to cut rates as early as March

2023 ended up as a reasonably good year for investors with bonds making a comeback and equities rallying strongly through November/December following a period of weakness.

In the US, inflation has been falling sharply while the economy has remained strong. Markets are now seeing a 90% chance that the Fed will cut rates as early as March and this expectation has been weighing heavily on USD with the Dollar Index falling to a 5-month low at the end of the year (has rallied back a little at the start of this year). There is not so much confidence that the Bank of England and the ECB will cut rates as soon as the US and both central banks maintain a cautious stance.

In the first week of 2024 investors will be closely monitoring some important data releases, including US jobs numbers and minutes of the Federal Reserve’s meeting last month.

US Risk Barometer 29th December 2023

Europe Risk Barometer 29th December 2023

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