Credit Market: How Is It Doing?
The Federal Reserve is scheduled to meet next Tuesday; but despite the dollar’s recent strength, the market is pricing in little chance of a quarter-point rate hike when everything is said and done. Currently, Fed Fund futures show a 6.3 percent probability of a hike to 2.25 percent – a significant drop from the nearly 25 percent odds measured only a month ago. Despite this expected passivity in the near-term however, traders still see a 71.5 percent chance that the central bank will tighten by the year’s end and shake the two-year easing/neutral cycle. All of this could change very quickly though as major event risk approaches. Both the 2Q GDP and July NFP numbers will offer a conclusive measure of strength for the world’s economy. And, considering the optimistic forecasts for growth and fragile state of financial markets, a disappointment here could have severe repercussions.
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07-30-2008, 11:27 PM
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