The European Central Bank’s Isabel Schnabel’s comments have influenced global interest rate markets. Traders are questioning the pricing of further Fed easing, leading to a 4-5 tick sell-off in Fed Funds futures for late 2026. The Fed terminal rate for the next year has risen by 20 basis points to 3.13% in the past two weeks. <\/p>\n
The upward move in US rates affected US growth stocks as discounted cash flows were adjusted. Despite Schnabel’s comments, scepticism remains about their true hawkishness. The news impacted EUR\/USD, with the Fed easing cycle being a primary factor. Expectations of a ‘hawkish cut’ at the upcoming FOMC meeting are significant. <\/p>\n
Before the FOMC meeting, US JOLTS data, expected to show a slowdown, will be in focus. Market pricing of Fed easing remains fragile, suggesting limited downside for the dollar. If today’s data exceeds expectations, the DXY might target 99.30.<\/p>\n
Global interest rate markets are shifting after recent comments from the European Central Bank. This has caused us to reconsider why the market is pricing in significant Fed easing of 90 basis points. As a result, the expected Fed terminal rate for next year has moved 20 basis points higher to 3.13% in just the last two weeks.<\/p>\n
This repricing is supported by recent strong economic data, which gives the Federal Reserve less reason to signal aggressive future cuts. For example, the jobs report released last Friday, December 5, 2025, showed the economy added a solid 190,000 jobs in November, beating expectations. Furthermore, the latest Consumer Price Index data showed inflation remains persistent at 3.2%, making the case for a more cautious Fed.<\/p>\n
With the Federal Open Market Committee meeting tomorrow, the market is now anticipating a ‘hawkish cut’. This means we may see a rate reduction, but the accompanying message will likely signal fewer cuts in the future than previously expected. This tone limits the potential downside for the U.S. dollar heading into the decision.<\/p>\n
For derivatives traders, this outlook suggests buying short-dated call options on the Dollar Index (DXY) could be a prudent strategy. Any upside surprise in today’s JOLTS job openings data could push the DXY, currently trading around 98.80, towards the 99.30 level. This would make call options profitable while limiting downside risk if the data is weaker than forecast.<\/p>\n
We have already seen a sell-off in Fed Funds futures contracts for late 2026, and this trend could have more room to run. This suggests that positions betting on a slower pace of rate cuts, such as selling SOFR or Fed Funds futures, may perform well. These trades directly reflect the view that the market has been too optimistic about the extent of Fed easing in 2026.<\/p>\n
Looking back, the market’s eagerness for rate cuts was a direct response to the aggressive hiking cycle we saw through 2023. That period of tightening was expected to cause a sharper economic downturn than what has actually occurred. Now, the surprising resilience of the U.S. economy is forcing this market-wide adjustment.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" Schnabel\u2019s remarks shake rate markets; Fed easing doubts rise, impacting futures, growth stocks, and EUR\/USD.<\/p>\n","protected":false},"author":62,"featured_media":16967,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-36379","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/posts\/36379","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/users\/62"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/comments?post=36379"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/posts\/36379\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/media\/16967"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/media?parent=36379"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/categories?post=36379"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-asia\/wp-json\/wp\/v2\/tags?post=36379"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}