How have interest rate expectations changed after this week's events?

Impact of Interest Rate Changes

Recent announcements indicate significant shifts in monetary policy expectations. Notably, the RBA has shown a hawkish stance, with traders now anticipating two more rate hikes this year, surpassing market forecasts. Conversely, the BoE surprised many by leaving rates unchanged with four members supporting a cut, leading to a more cautious market outlook regarding cuts. Lower inflation forecasts have compounded this sentiment. For the Fed, recent stock market sell-offs and disappointing job data have also prompted a more dovish interpretation of monetary policy moving forward. The Challenger job cuts report alongside lower-than-expected job openings is weighing on sentiment.

Upcoming Focus

Next week's US NFP report will be pivotal in confirming or contradicting the latest dovish repricing in interest rates. The market remains sensitive to shifts in rate expectations, warranting close attention.