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Bank of England Turns Hawkish

by Archer Financial Services | Feb 08, 2018

By Alan Bush | Senior Financial Economist at ADMIS     
 

STOCK INDEX FUTURES

Stock index futures are higher in spite of the federal budget impasse.

Jobless claims fell 9,000 to 221,000 in the week ended February 3 and remain near a 45 year low. Economists predicted a 235,000 reading.

Keep in mind that from when the recession lows for stock index futures were made in 2009, it has been the historically accommodative global monetary policies that have been the driver behind the meteoric price gains for stock index futures. However, from time to time, there have been a variety of geopolitical, or worrisome domestic political events that have temporarily interrupted the advance.

I stress the word temporary because every time traders and analysts have become too focused on the geopolitical risk-off event of the day, the bull market for stock index futures was eventually rescued by global central bank accommodation. Even with some central banks hiking interest rates and others withdrawing accommodation, global interest rates remain supportive to stock index futures.

I am not seeing the beginning of any new long term bear market for stock index futures. 

 

CURRENCY FUTURES

The U.S. dollar is lower as flight to quality longs are liquidated in light of higher stock index futures. 

Lower prices are likely for the greenback.

The euro currency is higher and is being supported by the belief that the European Central Bank will remove some of its accommodation later this year.

In addition, some analysts are predicting an interest rate hike from the ECB in the first quarter of 2019.

The main trend for the currency of the euro zone is higher.

The British pound is sharply higher after the Bank of England hinted at earlier and larger rate hikes.

BoE policymakers voted unanimously to keep interest rates on hold at 50 basis points at today’s meeting.

However, they said rates would need to rise "earlier" and by a "somewhat greater extent" than they believed in November.

Most economists are predicting the next rate increase could come as soon as in May.

 

INTEREST RATE MARKET FUTURES

Flight to quality longs are being liquidated in light of higher stock index futures. The thirty year Treasury bond futures are at new lows for the move and are trading at the lowest levels since April 2015.

Earlier today Robert Kaplan, president of the Federal Reserve Bank of Dallas, repeated his case for three rate hikes this year.

Kaplan said unemployment in the U.S. will drop below 4% and 2018 will be a "strong" year for the U.S.  

Kansas City Federal Reserve Bank President Esther George will speak at 8:00 this evening.

Following the 10 year notes sales yesterday, the U.S. Treasury will auction 30 year bonds today.

The probability of a fed funds rate increase at the FOMC’s March 21 policy meeting is 75%, which compares to 73% yesterday. 

The long trend for futures is lower, especially for the thirty year Treasury bond futures.

 

SUPPORT AND RESISTANCE

 

March 18   S&P 500

Support    2641.00       Resistance    2693.00

 

March 18   U.S. Dollar Index

Support    89.840         Resistance    90.510

 

March 18   Euro Currency

Support    1.22340       Resistance    1.23370

 

March 18   Japanese Yen

Support    .91180         Resistance    .92000

 

March 18   Canadian Dollar

Support    .79230         Resistance    .79850

 

March 18  Australian Dollar

Support    .7781           Resistance    .7855

 

March 18   Thirty Year Treasury Bonds

Support    143^12        Resistance    145^2

 

April 18   Gold

Support    1307.0         Resistance    1328.0

 

March 18   Copper

Support    3.0600         Resistance    3.1200

 

March 18   Crude Oil

Support    61.00           Resistance    62.43
 


For more information about these markets, please contact Alan at 312.242.7911  or via email at alan.bush@admis.com. Thank you.

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Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. The risk of loss in trading futures and options can be substantial. The views and opinions expressed in this letter are those of the author and do not reflect the views of ADM Investor Services, Inc. or its staff.  Research analyst does not currently maintain positions in the commodities specified within this report. The information provided is designed to assist in your analysis and evaluation of the futures and options markets.  However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright © ADM Investor Services, Inc.

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