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NEW YORK, June 10 (Reuters) - U.S. interest rate futures fell on Monday after U.S. President Donald Trump late Friday suspended a 5% tariff on Mexican tariffs as Mexico agreed to expand a program to stem the flow of illegal Central American migrants.
Still interest-rate traders’ expectations of multiple rate cuts in 2019, starting as early as July, remained high because of elevated trade tensions between Washington and Beijing.
Disappointing economic data last week, in particular a sharp deceleration in domestic jobs growth in May, increased conviction among traders that Fed policymakers will need to lower key lending rates soon to preserve the current economic expansion, which this summer would be longest on record.
At 10:05 a.m. (1405 GMT), federal funds futures implied traders saw a 19% chance the U.S. central bank would lower key borrowing costs by a quarter point to 2.00%-2.25% at its June 18-19 meeting, down from a 25% probability late on Friday, according to CME Group’s FedWatch program.
Fed funds contracts suggested traders priced in about a 48% chance the Fed would reduce the overnight costs for banks to borrow reserves from each other by 75 basis points at year-end. This compared with a 54% likelihood late Friday, the FedWatch tool showed.
Reporting by Richard Leong; Editing by Steve Orlofsky