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USD: Subject To A 'Large Appreciation' On 'Backward Induction' - Goldman Sachs
Much of the focus in recent weeks has been on whether the Fed will hike rates this year. We side-step that debate and work backwards, looking at what interest rate futures price in the medium term. Through mid-2019, i.e., over the next three years, fed funds futures suggest that little more than two hikes are priced , which is low even by the standards of the most ardent R-Star proponent. Further out, Eurodollar contracts show less than four hikes by 2021. One question is why market pricing is so low, something we revisit below, but – with the market so dovish – this is almost beside the point. With Vice Chair ... (full story)