#CreatorPad

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Market pricing for the US interest rate:

You have two main indicators:

⚫️ The current interest rate on the US dollar is 4.5%. Keep this number, we will need it later.

🟢 The futures interest rate for next December (end of the year) shows a level of 96.215.

To calculate the expected interest according to futures pricing, we subtract the contract price from 100:

100 – 96.215 = 3.785% (the interest rate the market expects by the end of the year).

By comparing the current interest with the expected interest:

🥇4.5% – 3.785% = 0.715%

This means that the market is currently pricing in a scenario of an interest rate cut of about 70 basis points during this year, considering that there are 3 upcoming meetings for the Federal Reserve until the end of the year.

Of course, this expectation is conditional on the absence of surprises in economic data. Any inflation indicators higher than expected (😱) or other surprises will lead to a rapid re-pricing of the market to align with the new reality.

In short, investors seem to show notable optimism for a significant interest rate cut. And as you know, when excessive optimism prevails, one should think with a more cautious mindset, because any change in the data will lead to immediate adjustments in interest rate estimates.

Good luck to everyone 🥇