Written Commentary
CURRENCY FUTURES
The U.S. dollar index is higher today, recovering from yesterday’s Federal Reserve inspired pressure.
Longer term, the greenback is likely to drift lower due to prospects of a more aggressively accommodative Federal Reserve.
The euro zone’s unemployment rate increased to 6.5% from the 6.4% rate in April and May. Economists expected the rate to hold steady at 6.4%.
The Bank of England lowered its key interest rate by 25 basis points to 5.0% at its policy meeting today, which is the first cut in over four years. Financial futures markets had priced in a 61% probability of a rate reduction.
INTEREST RATE MARKET FUTURES
The two-year, five-year, 10-year U.S. Treasury note futures, and the 30-year U.S. Treasury bond futures advanced to new highs for the move today.
Financial futures markets are pricing in three 25 basis point cuts in the fed funds rate later this year.
There is almost a 100% 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 at the November 7 meeting is 74%, and there is a 74% chance of another 25 basis point rate cut at the December 18 meeting.
Higher prices are likely for futures.
STOCK INDEX FUTURES
Stock index futures are higher today and are following through after yesterday’s strength in light of Wednesday’s dovish Federal Open Market Committee statement and Fed Chair Powell’s press conference.
The Federal Reserve at yesterday’s policy meeting kept its key interest rate unchanged as widely expected but hinted at an imminent interest rate decline. Federal Reserve Chair Powell said a rate cut in September could be on the table if inflation moves lower and is line with expectations.
Jobless claims in the week ended July 27 were 249,000 when 236,000 were expected.
Nonfarm productivity at an annual rate in the second quarter increased 2.3% when up 1.6% was anticipated, and unit labor costs on an annualized basis were up 0.9% when a gain of 1.9% was estimated.
The 8:45 central time July PMI manufacturing final is estimated to be 49.5.
The 9:00 July Institute for Supply Management manufacturing index is forecast to be 48.8, and the June 9:00 construction spending report is estimated to show an increase of 0.2%.
Coming easier credit policies from the Federal Reserve will underpin futures.
Interested in more futures markets? Explore our Market Dashboards here.
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 information and comments contained herein is provided by ADMIS and in no way should be construed to be information provided by ADM. The author of this report did not have a financial interest in any of the contracts discussed in this report at the time the report was prepared. 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.
