CME Group FedWatch shows 63.4% June hike probability

CME Group FedWatch tool, which calculates unconditional probabilities of Federal Open Market Committee (FOMC) meeting outcomes to generate a binary probability tree, shows the probability of a rate hike in June at 63.4%. 

In the past couple of weeks, the probability has been moving around 40% as the rising geopolitical concerns have been weighing on the U.S. Treasury-bond yields. CME Group explains its calculation method as being based on 30-Day Fed Fund futures prices, which have long been used to express the market’s views on the likelihood of changes in U.S. monetary policy.

Sunday’s French presidential election supported the expectation that centrist Emmanuel Macron would beat anti-EU candidate Marine Le Pen in a runoff on May 7, easing the concerns over a possible political shake-off in Europe, which could threat the integrity of the Union. Hence, the higher risk appetite lowered the demand for safer Treasury bonds, allowing a rally in yields and a higher chance of a June rate hike.

• IFOP poll: Macron 60% vs. Le Pen 40%