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Fed's Beige Book Today

by Archer Financial Services | Mar 06, 2019

By Alan Bush | Senior Financial Economist at ADMIS   

STOCK INDEX FUTURES

Stock index futures are lower after the Organization for Economic Co-Operation and Development lowered forecasts again for the global economy in 2019 and 2020, following previous downgrades in November.

The OECD forecast the world economy would grow 3.3% in 2019 and 3.4% in 2020. Those forecasts represent cuts of 0.2 percentage points for 2019 and 0.1 percentage points for 2020, compared to the OECD’s last series of forecasts in November.

The February Automatic Data Processing employment change report showed an increase of 183,000, which compares to expectations of a gain of 185,000.

Stock index futures have been performing better than the news would suggest since late December.

 

CURRENCY FUTURES

The U.S. dollar firmed as investors search for higher yields, as foreign major central banks have turned more cautious about increasing interest rates.

The greenback is higher in spite of a widening trade gap in December. The international trade deficit in goods and services increased 19% in December from the prior month.

The European Central Bank will hold its regularly scheduled policy meeting tomorrow. It is anticipated that ECB President Mario Draghi will deliver dovish commentary.

Traders believe the ECB will signal a delay in raising interest rates until 2020.

My personal belief is that the central bank of the euro zone will not be able to hike rates next year.

The Canadian dollar is lower after a report showed Canadian labor productivity declined 0.4% in the fourth quarter after two consecutive quarterly gains.  Market expectations were for a 0.3% decrease.

 

INTEREST RATE MARKET FUTURES

Federal Reserve speakers today are Cleveland Federal Reserve Bank President Loretta Mester at 11:00 and New York Federal Reserve Bank President John Williams at 11:10.

At 1:00 the Federal Reserve will release its “Beige Book” on the state of the economy. This book is produced approximately two weeks before the monetary policy meetings of the Federal Open Market Committee. The next FOMC meeting is scheduled for March 19-20.

Financial futures markets are predicting a 94% probability that the fed funds rate will remain unchanged at the current level of 2.25%-2.50% this year. There is a 5% chance for a 25 basis point increase and there is a 1% probability of a decline in 2019.

The thirty year Treasury bond futures recently tested the bottom of a broad trading range that started in the first week in January.

A U.S.-China trade agreement, or strong hint of one, would be a catalyst to take futures lower.

 

SUPPORT AND RESISTANCE

March 19 S&P 500

Support    2781.00      Resistance    2801.00

 

March 19 U.S. Dollar Index

Support    96.650        Resistance    96.980

 

March 19 Euro Currency

Support    1.12920      Resistance    1.13360

 

March 19 Japanese Yen

Support    .89350        Resistance    .89630

 

March 19 Canadian Dollar

Support    .7462         Resistance    .75010

 

March 19 Australian Dollar

Support    .7020         Resistance    .7097

 

June 19 Thirty Year Treasury Bonds

Support    144^4        Resistance    144^26

 

April 19 Gold

Support    1283.0       Resistance    1296.0

 

May 19 Copper

Support    2.9200       Resistance    2.9600

 

April 19 Crude Oil

Support    55.69         Resistance    56.57

 


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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