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Markets expect the Fed to hike in September – BAML

FXStreet (Edinburgh) - Brian Smedley, Rates Strategist at Bank of America-Merrill Lynch, argues that the Fed could start its hiking cycle in September, according to OIS forwards.

Key Quotes

“2015 started with a bang for US rates investors, with 10y Treasury yields down
50bp since late December to levels not seen since May 2013, shortly before the
Taper Tantrum”.

“The sharpest declines have been seen in the 2017-2020 sector of the Eurodollar curve as markets have re-priced the endpoint of the Fed hiking cycle”.

“Markets have also pushed out the timing of liftoff. OIS forwards are currently pricing in a 100% probability of the first hike occurring by September, in line with our house view, with the odds of a June liftoff down to just 40%”.

US stocks likely to see a weak opening

The stock markets in the US are likely to open lower after posting sharp gains in the previous session. The major index futures are trading in the red, indicating nervousness ahead of the Non-farm payrolls report on Friday.
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EUR/USD ignores upbeat services PMIs, favouring political developments – Scotiabank

Camilla Sutton CFA, CMT, Chief FX Strategist at Scotiabank, views EUR/USD might trade comfortably within its wide range, with the market ignoring strong services PMI to favour the ongoing political developments, namely Greece.
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