How have interest rate expectations changed after this week’s events?

We haven’t seen big changes in market pricing this week given the lack of key economic events. The only notable changes were seen with the Fed, ECB, SNB and RBA pricings.

The pricing for the Fed has been pretty stable around 48 bps by year-end for a long time and this latest increase to 50 bps is mainly because of yesterday’s selloff in the stock market. Given the K-shaped economy narrative, aggressive and prolonged selloffs in the stock market will cause traders to increase the rate cut bets. Something to be aware of for the future.

For the ECB, we’ve seen a bit of a dovish repricing after a few ECB members started to jawbone the euro as it spiked above the 1.20 level against the dollar. In fact, they started to talk about possible rate cuts in the future if euro’s strength negatively affected inflation in the eurozone.

For the SNB, the slightly dovish repricing was caused by the strong appreciation in the Swiss Franc. Inflation in Switzerland has been trending downwards for a long time, even threatening a return to negative territory. SNB’s policymakers though continue to reiterate that the bar for negative interest rates remains very high. At some point, they will have to intervene in FX or go back to negative rates.

For the RBA, the rate hike expectations got sealed this week following higher than expected Australia’s inflation data. The RBA is going to be the first major central bank to hike rates in 2026.

Will this be an isolated event or the start of a trend?