Citigroup and other major banks' forecasts of a 50 basis point rate cut are about to face a big test

The US non-farm payroll data released on Friday will be the biggest test for Citigroup and JPMorgan, who are betting boldly on a 50 basis point rate cut in September. For more than a year, forex traders have never been as excited as they are now before the release of the US employment report. On the eve of the key non-farm payroll data release, options used to measure the trend of the US dollar against major trading partners' currencies hit the highest level since March 2023. Risk reversal data shows that the dollar is pervaded by bearish sentiment. Since the weak July non-farm payroll data was released on August 2, Citigroup and JPMorgan have been predicting that the Fed will cut rates by 50 basis points in September and November, and by 25 basis points in December. Interest rate swap contracts show that the probability of the Fed cutting rates by 50 basis points at the September 17-18 meeting is about 35%, but traders and economists believe that the most likely scenario is a 25 basis point cut.