It's not often that the market and the Federal Reserve are on the same page.
Right now, the Fed's dot plot for this year shows 75 basis points in rate cuts this year while the Fed funds futures market shows 89 basis points in cuts.
The market-implied numbers are skewed because of tail risks but if you factor those 14 bps out, I'd say there's near-perfect alignment.
It won't last. The trading theme so far this year has been a market re-think on every economic data point. We started out the year with 140 basis points in easing priced in but that's been pared down by overwhelmingly positive economic data.
Last week though, US retail sales missed estimates for January and there were growing questions about whether seasonal adjustment problems artificially boosted the trio of CPI, PPI and import/export prices.
This week is a bit of a lull in US economic data so we could see more of a focus on the other sides of the USD/XXX equations. That's fitting given that it's a US holiday today.
