This trading week, the US Federal Reserve will clearly be in the spotlight, even though several other major central bank meetings are also taking place. These won’t attract nearly as much attention as the Fed, however. Markets are waiting not only for the Fed’s immediate rate decision but also for the guidance it provides for the upcoming meetings in October and December.
Looking at Fed Funds futures, traders have fully priced in a 25 bps rate cut this week, while the probability of a 50 bps cut is just 4%. By year-end, around 69 bps of rate cuts are currently priced in. This highlights the risk: any deviation in the Fed’s tone – whether dovish or hawkish – could amplify market reactions.
The Fed’s decision will be the dominant event, set to impact bond yields, risk sentiment, the US dollar, and broader market mood, especially in gold.
Still, other central bank meetings should not be overlooked. On Wednesday, the Bank of Canada meets, with markets pricing in a roughly 90% chance of a 25 bps rate cut to 2.50%. On Thursday, the Bank of England is expected to keep its policy rate unchanged at 4.00%. Finally, on Friday, the Bank of Japan is also expected to maintain the status quo, keeping rates steady while carefully considering the timing of its next potential hike.
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