Written Commentary
The Ghost in the Machine Q1 2024
March 19, 2024
CURRENCY FUTURES
The U.S. dollar index remains near its lowest level since August 15 due to speculation about a possible Federal Reserve policy shift.
The U.S. dollar has underperformed in the last two months as interest rate differential expectations have turned against the greenback.
The annual inflation rate in the U.K. jumped to 11.1% in October of 2022 from 10.1% in September, which is much higher than market forecasts of 10.7%. This is the highest inflation rate since October 1981.
Canada’s annual inflation rate was 6.9% in October of 2022, remaining unchanged from the previous month and in line with market expectations.
Housing starts in Canada decreased by 11% over a month earlier to 267,055 units in October of 2022, which is below market expectations of 270,000 units.
STOCK INDEX FUTURES
Retail sales in October increased 1.3% when a 1.0% gain was expected.
Import prices in the U.S. decreased by 0.2% from a month earlier in October of 2022, following a 1.1% decline in the previous month and compared with market expectations of a 0.4% drop.
The 8:15 central time October industrial production report is anticipated to show a 0.2% decline and the 8:15 capacity utilization report is predicted to be 80.4%.
The 9:00 November housing market index is estimated to be 36.
The technical and fundamental aspects are improving for stock index futures.
INTEREST RATE MARKET FUTURES
The Treasury will auction 20-year bonds.
Federal Reserve speakers today are Michael Barr at 9:00 and Christopher Waller at 1:35.
According to financial futures markets currently, there is an 81.0% probability that the Federal Open Market Committee will increase its fed funds rate by 50 basis points at the December 14 meeting and a 19.0% probability that the rate will be hiked by 75 basis points.
Three weeks ago there was a 98.0% probability of a 75 basis point increase and a 2.0% chance of a 100 basis point hike.
The technicals and fundamentals are looking more constructive for the interest rate market futures.
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