Looking to the Futures

Central Bank Moves

May 8, 2025 Ryan Hinsen
Central banks around the world have been lowering their benchmark interest rates this year even as most take a pause in April.

Only the European Central Bank (ECB) and the Reserve Bank of New Zealand out of the 10 central banks supervising the most liquid currencies (G10 currencies) lowered their benchmark rate in April. The Bank of Japan (BOJ), Bank of Canada, and the Reserve Bank of Australia all decided to leave their rates unchanged in April with the U.S Federal Reserve making the same decision yesterday. Back in February, half of the G10 central banks lowered their benchmark rates. 

8 out of the 10 group of G10 central banks have lowered interest rates this year by a total 325bps. Only The Bank of Norway has kept interest rates unchanged while the Bank of Japan increased its policy rate by 25bps. 

Central banks of developing economies followed a similar pattern. India, Thailand, the Philippines, and Colombia lowered their interest rates by 25bps each. 8 other central banks tracked by Reuters left their rates unchanged. The Turkish central bank increased their benchmark rate by 350bps last month, leaving the rate only down 1.5% this year. The Banco Central do Brasil has raised its interest rates by 250bps so far this year after raising it another 50bps yesterday. According to Reuters, other central banks of emerging markets have lowered benchmark rates by 850bps so far this year. 

Asian currencies have seen record-setting moves in the last week. The Taiwan dollar surged 6% against the U.S. dollar between Friday and Monday. This has caused many to speculate that Taiwan’s central bank has agreed to allow its currency to strengthen as part of its trade deal with the United States. The president of the bank has denied that assertion though. Typically, in the midst of an export and growth shock induced by a trade war, many Asian central banks would intervene to depreciate their currencies to keep their exports competitive. 

The South Korean won set its largest two-day win streak in 15 years on Monday. The Chinese offshore yuan rose to a six-month high on Monday before the onshore renminbi jolted higher when its markets opened on Tuesday. 

Over the weekend, the Hong Kong Monetary Authority sold HK$46.54 billion ($6 billion) to enforce its peg between 7.75 – 7.85 HK per US dollar (USD). This marked its first intervention in over 4 years and its largest intervention on record. 

President Trump has repeatedly called out other nations for currency manipulation, arguing that their central banks have kept their exchange rates artificially weak through intervention and by accumulating large foreign currency reserves. All else equal, a stronger currency will make a country’s exports less competitive. However, now that intra-Asian commerce has grown to account for over half the exports in the region, if all their currencies appreciate together the headwinds on exporters should be diminished.

 Expectations for rate cuts from the Federal Reserve have swung wildly this year. Last month the fed funds futures markets were pricing in with certainty the next rate cut would occur in June. Last week that dropped to only a 63% chance it would happen in June. Now it is only pricing in a 24% chance. The first rate cut is now expected in July. Last week the same futures market was pricing in 100 – 125bps in cuts this year. Now the market is only pricing in 75 – 100bps for this year.

Technicals

The Brazilian Real futures (/6L) are in medium-term uptrend as it remains above its 50-day moving average. However, it has formed a double top at the .177 level. The recent peak on April 29th coincides with the largest net long position ever reported on the Commitment of Traders report for that contract. 

Real bulls will need more buyers to show up in order to break resistance at the .177 price level. To the downside, the first level support can be found at .166 where previous demand has arrived. 

Brazilian Real (/6L) Chart

Brazilian Real (/6L)  Contract Specifications

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