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FOMC is Main Event Today

by AFS Archer Financial Svcs | Mar 20, 2019

By Alan Bush | Senior Financial Economist at ADMIS   

STOCK INDEX FUTURES

According to press reports, the U.S. and China are moving closer to a formal trade agreement. U.S. Treasury Secretary Mnuchin and U.S. Trade Representative Lighthizer reportedly are traveling to China next week, and Chinese negotiators are heading to Washington after that for high-level discussions in an attempt to get a trade deal wrapped up. Some analysts are speculating that an agreement will be reached, but it won’t include important demands from the U.S. that address theft of intellectual property. 

The two-day Federal Open Market Committee meeting concludes today. A statement will be released at 1:00 central time, and Fed Chair Powell will hold a press conference at 1:30. 

Following a 13% rally this year, the benchmark S&P 500 is now 3.5% away from its record closing high that was registered in September. 

Since the lows were made in late December, stock index futures have been performing better than the news would suggest, which should be viewed as a sign of long term strength.

CURRENCY FUTURES

Much of today’s trade appears to be evening up ahead of the FOMC statement.

Germany's producer price inflation was unchanged in February when an acceleration was expected, after slowing in the previous two months.

The producer price index increased 2.6% year-on-year, which was the same as in January. Economists had expected a higher rate of 2.9%.

The British pound is lower due to the uncertainties of the Brexit situation. 

U.K. Prime Minister May is expected to ask for only a short extension, as the March 29 Brexit deadline fast approaches. This would allow the British Parliament to vote for a third time on a version of May’s Brexit agreement. 

The pound is lower in spite of news that U.K. consumer price inflation unexpectedly accelerated in February for the first time in six months. 

Consumer prices in the U.K. rose 1.9% in the year through February, which compares with an annual gain of 1.8% in the previous 12 months.  Economists had expected the inflation rate to remain unchanged. 

INTEREST RATE MARKET FUTURES  

The Federal Open Market Committee is expected to keep its fed funds rate unchanged. Analysts anticipate the Fed will maintain the dovish tone it struck at its January meeting when it put its rate increasing plan on hold and became “data dependent.” 

In addition, it is anticipated that the policy statement will shed light on the long awaited details of the Fed’s plans to stop reducing its holdings of Treasury bonds. 

A flurry of downbeat economic data this month has supported market expectations that the FOMC may reinforce a halt to further increases in interest rates. 

Financial futures markets are predicting there is a 71% probability that the fed funds rate will remain unchanged at the current level of 2.25%-2.50% this year. There is a 28% chance for a 25 basis point or more decline in the fed funds rate in 2019 and a 1% chance of a rate increase.

SUPPORT AND RESISTANCE

June 19 S&P 500
Support    2821.00      Resistance    2852.00

June 19 U.S. Dollar Index
Support    95.650        Resistance    96.200 

June 19 Euro Currency
Support    1.14070      Resistance    1.14680

June 19 Japanese Yen
Support    .90010        Resistance    .90580

June 19 Canadian Dollar
Support    .75010        Resistance    .75390 

June 19 Australian Dollar
Support    .7052          Resistance    .7123 

June 19 Thirty Year Treasury Bonds
Support    145^12       Resistance     146^16 

April 19 Gold
Support    1300.0        Resistance    1316.0 

May 19 Copper
Support    2.9050        Resistance    2.9400 

May 19 Crude Oil
Support    58.33          Resistance    59.88

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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