Written Commentary
INTEREST RATE MARKET FUTURES
Yesterday’s two-year U.S. Treasury note auction received record foreign demand as yields declined.
The U.S. Treasury will auction five-year notes today.
There is a 95% probability that the Federal Open Market Committee will keep its fed funds rate unchanged at 5.25% to 5.50% at its July 31 policy meeting. However, financial futures markets are now pricing in three 25 basis point cuts in the fed funds rate later this year.
There is a 95% 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 60%, and there is a 56% chance of another 25 basis point rate cut at the December 18 meeting.
Higher prices are likely for futures.
CURRENCY FUTURES
The U.S. dollar index is lower due to prospects of an accommodating Federal Reserve.
There was pressure on the euro currency after weak PMI data for the euro zone, which increased expectations that the European Central Bank will lower interest rates two more times this year.
The HCOB Flash euro zone Composite PMI declined to 50.1 in July 2024, which is well under forecasts of 51.1.
The S&P Global U.K. Composite PMI increased to 52.7 in July, which exceeded expectations of 52.6.
The Japanese yen hit the highest level against the U.S. dollar since early June as pressure increases for the Bank of Japan to hike interest rates at its July 31 policy meeting.
The Bank of Canada will hold its policy meeting today, and many analysts believe the central bank will reduce its benchmark interest rate by 25 basis points to 4.50%.
STOCK INDEX FUTURES
Stock index futures are lower due to weaker than expected corporate earnings reports, especially in the high tech sector, which adversely affected NASDAQ futures.
The 8:45 central time July PMI manufacturing index is expected to be 51.6, and the 9:00 June new home sales report is anticipated to be 640,000.
Follow-through selling is likely in the morning. However, there will probably be some recovery in the afternoon trade.
The longer term fundamentals remain supportive to stock index 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.
