Societe Generale upgraded its US growth outlook for 2026 and later after strong US labour market data for January. The change reflects labour market strength and other high-frequency activity measures.<\/p>\n
The Federal Reserve has linked its policy decisions to labour market conditions and inflation. With inflation still elevated and the labour market solid, Societe Generale adjusted its expectations for the Fed funds rate path.<\/p>\n
The bank now forecasts only one Fed funds rate cut in 2026, most likely at the June FOMC meeting. It also notes a risk that incoming data could keep rates on hold until later in 2026.<\/p>\n
The article was produced using an AI tool and reviewed by an editor. It was published by the FXStreet Insights Team, which selects market observations from external experts and adds analysis from internal and external contributors.<\/p>\n
The strong January jobs report is forcing us to rethink the Federal Reserve’s path for 2026. January saw a gain of over 350,000 jobs, crushing the 180,000 consensus and showing the labor market is still running hot. This strength, combined with other high-frequency data, fundamentally delays any anticipated rate cuts.<\/p>\n
This situation is a stark reminder of 2025, when we saw the market consistently price in multiple cuts that never came to fruition. With the latest CPI inflation data holding firm at 3.4%, well above the Fed’s target, there is very little pressure on policymakers to ease. The narrative is shifting from expecting cuts to questioning if they will happen before the second half of the year.<\/p>\n
In the coming weeks, we should see continued repricing in interest rate futures markets. The probability of a rate cut in the March and May contracts is likely to fall towards zero, with even the June SOFR futures contract showing reduced odds of a cut. We are unwinding any positions that bet on an early easing cycle.<\/p>\n
For options traders, this heightened uncertainty around the timing of a cut will likely increase implied volatility, especially for contracts tied to FOMC meeting dates. The cost of options that protect against a prolonged hold, or even a surprise hike, will rise. Short-volatility strategies in the rates market have become significantly riskier.<\/p>\n
This impacts equity derivatives as well, particularly for growth sectors sensitive to interest rates. We should anticipate that call options on indices like the Nasdaq 100 may underperform as the “higher for longer” scenario weighs on valuations. The risk is now skewed toward a later, not an earlier, move from the Fed.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" Societe Generale raises 2026+ US growth outlook after strong January jobs; expects one Fed cut, June.<\/p>\n","protected":false},"author":62,"featured_media":17021,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-41697","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-ca\/wp-json\/wp\/v2\/posts\/41697","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/users\/62"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/comments?post=41697"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/41697\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media\/17021"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media?parent=41697"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/categories?post=41697"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/tags?post=41697"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}