It's not just Fed week, we are also getting rate decisions from the ECB, BOE and SNB this week. The rule of thumb for all of them is that 50 basis point are expected, though not certain.
The Fed will set the tone on Wednesday and I don't see much drama around the decision, you should be keeping an eye out for a Timiraos leak in New York trading today. He typically delivers his final preview on the Monday ahead of the FOMC. I suspect he will continue to put an emphasis on higher-for-longer messaging and that's what the Fed will do as well.
In any case, the market is priced at 91% for 50 bps with the remainder on 75 bps and the terminal rate at 4.96%.
The following day is a triple header with the ECB, SNB and BOE all within hours of one another. BOE pricing is the firest at 93% for 50 bps and the remainder at 75 bps. However under the surface, there's talk about a four-way vote split with one vote for no change, one for 25 bps and up to three for 75 bps.
The SNB pricing is at 72% for 50 bps but unlike the others, the market sees the tail risks towards 25 bps and that's priced at 28%.
The ECB is far from certain with 68% pricing for 50 bps and the rest at 75 bps. Some top officials have talked lately about rising inflation risks but so much of that circles back to energy. My take is that the global consensus is moving away from sustained inflation , particularly with the fall in oil prices, and that we will see 50 bps.
In any case, it's going to be a wild week and it won't take long to ramp up with some big UK releases upcoming today, then German and US CPI tomorrow.
