Rate cut odds accelerated after President Trump told Axios that he expects officials from the U.S. and Iran to meet for a second round of peace talks in the coming days. The odds also received a helping hand after Iran announced that it would reopen the Strait of Hormuz for commercial vessels, easing inflation concerns in the process. The waterway will remain open for the duration of the 10-day Israel-Lebanon ceasefire.
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New trading tool for QQQ bullsWhile still low, the odds of a 25 bps cut at the July 29 Federal Open Market Committee (FOMC) meeting more than doubled to 16.6% from 7.8% a day ago, according to the CME FedWatch tool.
Fed Pause Expected as Oil Risks Linger
The Fed will meet for its next FOMC meeting on April 29, when it is widely expected to hold rates steady. By year-end, the most likely outcome is for unchanged rates with 50.5% odds. Still, the odds of one rate cut climbed to 37.1% from 25.9%.
Uncertainty still surrounds Hormuz, with Trump issuing a contradictory statement that Iran had agreed to never close the passage again. Hormuz is responsible for 20% of global oil flows, and any disruption will likely lead to an oil supply shock and higher inflation. If Hormuz remains open, inflation will become a smaller issue for the Fed and economy, strengthening the case for rate cuts.