🎯 Top Story

US rate futures now price over 50 percent chance of Fed hike by January

What happened: US interest rate futures are now pricing in a more than 50 percent probability that the Fed will hike rates by January of next year.

Why it matters: Markets have shifted from pricing rate cuts to pricing rate hikes. This is a major policy expectations reversal.

Market impact: Bullish for the dollar. Markets no longer expect near-term easing.

🔥 Quick Takes

💵 Dollar

• Fed: Powell will serve as "interim chair" until Warsh is formally sworn in → Smooth leadership transition. Policy continuity is intact.
• "Bond King" Gundlach: The Fed cannot cut rates at all → A major Wall Street voice turning hawkish.
• US rate futures: More than 50 percent chance of a Fed hike by January → A major shift in policy expectations.

💶 Euro

• ECB's Vujcic: Whether to hike in June depends on incoming data → Data-dependent. The June meeting is still live.
• ECB's Stournaras: Small rate hikes can curb inflation without hurting the economy → Hawkish. Supports a gradual tightening path.
• France finance minister: Expects economy to recover in Q2; sees 0.9 percent growth for 2026 → Relatively optimistic compared to Germany.

💷 Pound

• UK media: Prime Minister Starmer intends to resign and has set an orderly departure timeline → Political crisis enters a new phase.
• Manchester Mayor Burnham: Announces intention to run for Prime Minister → The succession race is starting.
• Former Health Secretary Streeting: Will enter race to replace Starmer → Multiple candidates vying for leadership. Political uncertainty is rising.
• BOE Deputy Governor Breeden: The BOE should not be too aggressive on rates; political uncertainty will affect businesses → Dovish lean. Rate hike expectations may cool.

🌏 Other

• Trader: RBI may sell dollars around 96.20 rupees → Intervention signal. The rupee is under pressure.
• Turkey finance minister: Iran war shock could worsen Turkey's budget deficit → Geopolitical risks dragging on fiscal position. Lira under pressure.
• Australia treasurer: Capital gains tax reform aims to fix housing market → Policy direction is clear. Limited impact on the Aussie.
• Sources: Japan may issue new debt to fund supplementary budget → Fiscal expansion signal. Near-term pressure on the yen.
• Thailand finance minister: Will increase investment to support recovery. Fiscal policy has room → Dovish tilt. The baht lacks a catalyst.

📊 Key Data Snapshot

💡 Final Take

• Three themes stand out today: US rate futures pricing hikes, UK prime minister resigning, and hawkish voices at the ECB.💵 Dollar: Rate futures now price a more than 50 percent chance of a Fed hike by January. Gundlach says the Fed cannot cut rates at all. The Fed leadership transition is smooth. The dollar's strong trend remains intact.
• 💷 Pound: Prime Minister Starmer intends to resign. The Manchester mayor and former health secretary both announced their intention to run. A leadership vacuum is coming. BOE's Breeden says the bank should not be too aggressive. Rate hike expectations may cool.
• 💶 Euro: Vujcic says June hike depends on data. Stournaras supports small hikes. France expects 0.9 percent growth this year. Divergence within the euro zone is widening.
• 🌏 Others: RBI may sell dollars around 96.20. Japan may issue new debt for a supplementary budget. Turkey warns of a worsening budget deficit.

 US rate futures are now pricing hikes, not cuts. The dollar is strong. The UK prime minister is stepping down, creating a leadership vacuum. Hawkish voices at the ECB are growing louder.

🔮 Looking Ahead

• When will Warsh be formally sworn in as Fed chair?
• UK leadership race developments
• Euro zone data ahead of the ECB June meeting
• RBI intervention effectiveness on the rupee
• Japan supplementary budget size