Citigroup and other major banks' forecasts of a 50 basis point rate cut are about to face a big test

For Citigroup and JPMorgan Chase, which have made bold bets on a 50 basis point rate cut in September, Friday's U.S. non-farm payrolls data will be their biggest test. For more than a year, foreign exchange traders have not been as excited as they are now before the release of the U.S. employment report. On the eve of the release of the key non-farm payrolls data, options used to measure the direction of the U.S. dollar exchange rate against major trading partners hit their highest level since March 2023. Risk reversal data showed that bearish sentiment on the dollar was pervasive. Since the release of the weaker-than-expected July non-farm payrolls data on August 2, Citigroup and JPMorgan Chase have been predicting that the Federal Reserve will cut interest rates by 50 basis points in both September and November, and by 25 basis points in December. Interest rate swaps show that the probability of a sharp 50 basis point rate cut by the Federal Reserve at its September 17-18 meeting is about 35%, but traders and economists believe that a 25 basis point cut is the most likely. (Jinshi)