Fed rate cut odds move higher after weaker retail sales data yesterday
Fed fund futures show that odds of a 25 bps rate cut have moved up to ~84% now from around ~72% before the US retail sales data hit yesterday.
As long as the US-China trade situation continues to sit in a bit of limbo as it is right now, the Fed will be put in a bit of an unenviable situation going into the 30 October decision.
Recent remarks by Fed officials suggest that they are "okay" with another rate cut if there is a need for it but they are not going to push the issue too firmly. That is even the case for ultra-dove Bullard and that says a lot.
If anything else, it just means that at present situation, we're near the end of this supposed "mid-cycle adjustment" that Fed chair Powell has been alluding to previously.
The thing about the Fed is that they have a track record of being bullied into decisions by markets over the past three to four years.
With Fed fund futures indicating ~84% odds of a rate cut, it seems like they will get bullied into another one come the end of the month.
However, if they intend to walk back on that, the remaining speakers have a very tall order to overcome and I reckon a lot will hinge of Fed vice chair Clarida's speech tomorrow (he is also the last Fed speaker on the agenda) at 1530 GMT.
