🏦📊Curve Spreads Favour Sterling Over Euro: Cable FX Macro

**As seen in Online Tools > IRP (Interest Rate Probability), get access now! Subscribe at cablefxm.co.uk

• Fed's pricing is unchanged this week, fed funds futures price in a 50% chance of a 1/2 percentage rate cut in November and a total 70bps of easing by the end of the year. In plain english, traders expect a 50bps rate cut in November and a 25bps rate cut in December

• As the Fed eases, the degree of monetary policy divergence can be found using our Curve Spreads chart (top left chart). Selecting for US-EU and US-GBP, we can compare pricing for the Fed vs the ECB and BoE

• Over the next four meetings, sterling is set to be favoured as the implied rates spreads are wider between the Fed and BoE. The curve shows 26bps spread to the ECB while the BoE holds almost twice this much. In plain english, the BoE is expected to ease the policy rate less than the ECB and Fed, leaving the GBP as an attractive target, 1yr implied rates for GBP stand at 3.52% vs 1.83% for the EUR (top right table)