Fed Decision Looms: Markets Anticipate Surprise Rate Hike

Global markets are bracing for the upcoming Federal Reserve meeting as investors anticipate a surprise decision. ING's Michiel Tukker expects the Fed to keep rates on hold, but notes that there is a 30% chance of a hike.

The front end of the EUR and GBP markets could move higher if the Fed decides to hike rates, while longer-dated global rates may struggle to follow suit. If financial conditions tighten, positive market sentiment could be challenged, leading to increased jitters in equities due to AI uncertainties.

According to Tukker, a scenario where the Fed hikes rates and market sentiment takes a hit is possible. In this case, shorter rates would rise, but longer rates might find resistance to follow through. The positive global growth outlook could be challenged if this outcome occurs.