Written Commentary
INTEREST RATE MARKET FUTURES
There are no Federal Reserve speakers with the Federal Reserve’s blackout beginning this last weekend. The ‘blackout’ policy from the Federal Reserve limits the extent that Federal Open Market Committee members and staff can speak publicly or grant interviews.
The U.S. Treasury will auction two-year notes.
The US Dollar Index Trades Higher (youtube.com)
There is a 97% probability that the Federal Open Market Committee will keep its fed funds rate unchanged at 5.25% to 5.5% at its July 31 policy meeting.
However, there is a 94% probability that the FOMC will lower its fed funds rate by 25 basis points at its September 18 meeting.
In addition, the probability of an additional rate reduction from the FOMC has now been moved up to the November 7 meeting where there is a 52% chance of another 25-basis point cut in the fed funds rate.
Higher prices are likely for futures.
CURRENCY FUTURES
The U.S. dollar index is higher.
The Japanese yen traded higher for the second straight session in light of growing expectations that the Bank of Japan will hike interest rates again when it meets on July 31.
The Bank of Canada will hold its policy meeting tomorrow. The consensus is for the BoC to keep interest rates unchanged at 4.75%, although some economists are predicting a 25 basis point rate cut.
STOCK INDEX FUTURES
Stock index futures are mixed.
The 9:00 central time June existing home sales report is expected to show 4 million and the 9:00 July Richmond Federal Reserve manufacturing index is anticipated to be -7.
The Flash PMI report for July will be released tomorrow, followed by an advance gross domestic product reading for the second quarter on Thursday and the PCE price index report on Friday.
The longer term fundamentals remain supportive to stock index futures.
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