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Markets have long priced some degree of easing by the Fed. Until recently much of this was priced to occur later in the year and was to a limited extent (around one and a half cuts by December). Now, markets are pricing three cuts in 2020, strategists at ABN Amro inform.

Key quotes

“In just the past week, markets have come around to fully pricing a cut as soon as April, two cuts by June, and three cuts by the end of 2020 – all of this driven by concerns over the coronavirus fallout.” 

“The US government has yet to implement measures quite as severe as those affecting Asia and parts of Europe, but the economy will no doubt be affected by the reduced trade and tourism that results from measures taken elsewhere.”

“As the impact on growth becomes more tangible, our view is that the Fed will implement a rate cut in Q2, and the increasing downside risks to growth suggest that such a cut is likely to come sooner rather than later.”