Bond Futures Likely to Recover

STOCK INDEX FUTURES

Jobless claims in the week ended July 16 were 251,000 when 240,000 were expected.

The July Philadelphia Federal Reserve manufacturing index was negative 12.3 when 0.4 was anticipated.

The 9:00 central time June leading indicators index is estimated to decline 0.5%.

Futures are being supported by the belief that the Federal Open Market Committee is becoming less hawkish.

CURRENCY FUTURES

The euro currency is higher after the European Central Bank raised all monetary policy rates by 50 basis points for the first time in 11 years, which is above the market consensus for a 25 basis point hike.

The common currency declined below the key $1.00 level last week for the first time in 20 years, on concerns the energy crisis could push Europe into a recession and make it more difficult for the ECB to tighten monetary policies.

Italy’s Prime Minister Mario Draghi resigned again on Thursday and President Sergio Mattarella is likely to announce early elections for October.

The Bank of Japan at its policy meeting today kept interest rates unchanged despite a consensus on its policy board that inflation is likely to increase above the bank’s 2.0% target this fiscal year. The BoJ kept its deposit rate at negative 10 basis points and its 10-year yield target near 0%.

The yen is near its lowest level against the U.S. dollar in almost a quarter century, but Bank of Japan Governor Haruhiko Kuroda said he wasn’t inclined to fight the market to push the Japanese currency higher.

INTEREST RATE MARKET FUTURES

According to financial futures markets, there is a 64.4% probability that the Federal Open Market Committee will hike its fed funds rate by 75 basis points and a 35.6% probability that the rate will increase by 100 basis points at the July 27 meeting.

Futures are likely to advance from current levels today now that the ECB interest rate hike is out of the  way.

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