After a relatively dovish FED yesterday, where participants reduced their forecast for interest rates in 2017 by 30 basis points and 60 basis points for 2018, rates market backed away from pricing a hike this year. FOMC still projected two hikes this year but according to market that seems very unlikely.
- Before the FOMC, the market was pricing 79 percent chance of no hike in July but that deteriorated to 93 percent as of now.
- September odd of status quo was at 64 percent before, now that is at 82 percent.
- Previously market was pricing 62 percent chance of no hike in November but the market is sure with 77 percent probability that there won’t be a hike.
- Previously market was forecasting a hike in December but that chance has now deteriorated to 41 percent.
The probability of the second hike in December now stands at just 6 percent.
Back in December, we at FxWirePro was forecasting one or two hikes this year, we maintain that view but think that British referendum will be a big factor in determining that.


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