We’ve seen the Bank of Canada signal a deviation this week, but that’s unlikely to happen for the Big Three as the focus is on next week. First, the FOMC decision is on Wednesday and the markets will not price in any drama around Powell and the Fed. They gave a strong signal that the pace of rates will slow, giving the market a 97% chance of 25 basis points and only the slightest risk of 50 basis points. Given the enthusiasm in the market, 50 bps would put the multiplier slightly higher. The following day are the decisions of both the ECB and the BOE. The ECB is expected to raise the base rate by 50 basis points to 2.50%, with a price of 86% but with a 75% probability of 1 %. I think the probability of 75 bps is too high. The ECB has received so many signals from consecutive 50 bps moves that I see no need to change. Of the three, the BOE is the least certain about the market price. The exchange rate market is 70% for 50 bps and 30% for 25 bps. Markets are watching the vote here as uncertainty about future interest rates is high.
