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FOMC May Be Less Hawkish in 2019

by Archer Financial Services | Oct 11, 2018

By Alan Bush | Senior Financial Economist at ADMIS   

STOCK INDEX FUTURES

There was follow-through selling in the overnight trade due to concerns over rising U.S. interest rates. Stocks in Europe and Asia were pressured, as well, including the 5.2% decline in the Shanghai Composite index.

The U.S. consumer price index increased 0.1% in September after rising a seasonally adjusted 0.2% in August.  Economists expected consumer prices to increase 0.2% in September.  Core consumer prices advanced 0.1% when up .2% was anticipated.

Initial jobless claims increased 7,000 to a seasonally adjusted 214,000 in the week ended October 6. Economists expected 208,000 new claims last week.  

The still relatively low interest rate environment and a likely less hawkish Federal Open Market Committee next year suggests recent weakness is a correction and we have not seen the top for stock index futures.

 

CURRENCY FUTURES

The U.S. dollar is lower and most other currencies are higher after the U.S. consumer price index came in weaker than expected.

The British pound is higher even though a spokesmen for U.K. Prime Minister May said there are still major issues to be resolved in the Brexit negotiations.

Interest rate differential expectations appear to be turning against the U.S. dollar.

 

INTEREST RATE MARKET FUTURES

Futures are higher on the belief that the Federal Open Market Committee may not be quite as aggressively hiking interest rates next year. However, it remains very likely that the Fed will increase interest rates in December. 

According to the financial futures markets, the probability of a fed funds rate hike at the Federal Open Market Committee’s December 19 policy meeting is 76%, which compares to 83% yesterday.

The Treasury will auction 30 year bonds today.

I anticipate that in the weeks ahead Federal Reserve officials will back off a little from their hawkish rhetoric. The FOMC cannot increase interest rates unilaterally with the rest of the global economy either growing slowly, just steady, or slowing as is the situation in China.

However, the long term trend for futures is still lower.

 

SUPPORT AND RESISTANCE

December 18   S&P 500

Support    2744.00      Resistance    2798.00

 

December 18   U.S. Dollar Index

Support    94.550        Resistance    95.150

 

December 18   Euro Currency

Support    1.15820      Resistance    1.16690

 

December 18   Japanese Yen

Support    .89340        Resistance    .89880

 

December 18   Canadian Dollar

Support    .76580        Resistance    .76970

 

December 18   Australian Dollar

Support    .7052          Resistance    .7143

 

December 18   Thirty Year Treasury Bonds

Support    137^20       Resistance    138^20

 

December 18   Gold

Support    1193.0        Resistance    1218.0

 

December 18   Copper

Support    2.7100        Resistance    2.7850

 

November 18   Crude Oil

Support    71.45          Resistance    72.88


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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