Traders are beginning to bet that the Fed will cut interest rates significantly at least once before the end of the year, convinced that the policy may be more aggressive than currently expected by other market observers.

Options tied to the Secured Overnight Financing Rate (SOFR) have recently seen trading activity indicating that the market is increasing its positioning for a half-point rate cut, potentially taking place at either a later meeting this month or the December meeting. This expectation exceeds the two 25-basis-point rate cuts already priced into the current rate swap.

Due to the prolonged U.S. government shutdown, key employment and other economic data releases have been delayed. Once the impasse is resolved, a large amount of data will emerge, revealing the latest changes in the economic situation. Some expect that this data may further demonstrate economic weakness, thereby supporting further rate cuts. (FXStreet)