CURRENCY FUTURES
The September U.S. dollar index futures are lower and are closing in on the August 18 lows at 92.11.
Much of the recent weakness in the greenback can be linked to the more accommodative Federal Reserve policies. The Fed’s now formalized “average inflation targeting,” suggests the U.S. central bank will remain accommodative for longer.
Some of the bears on the greenback for a while have speculated that the Federal Reserve may loosen its approach to inflation and now, it has.
The U.S. dollar will likely trend lower on the Fed’s new strategy.
The euro currency is higher despite news that preliminary data shows German consumer prices declined in August for the second consecutive month.
Consumer prices declined 0.1% on the month in August as measured by national standards and fell 0.2% on E.U. harmonized standards. Economists had forecast prices would remain flat in both national standards and E.U. harmonized standards.
The British pound is lower on reports that the U.K. is ready to walk away from Brexit trade talks over state aid demands.
STOCK INDEX FUTURES
S&P 500 and NASDAQ futures advanced to new record highs today.
Futures continue to be underpinned by last Thursday’s speech from Federal Reserve Chairman Jerome Powell at the Kansas City Federal Reserve’s annual economic policy symposium when he signaled looser monetary policy for longer.
Chairman Powell called for a “robust updating” of Federal Reserve policy. The central bank has formally agreed to a policy of “average inflation targeting,” which means it will allow inflation levels to run “moderately” above the Fed’s 2.0% goal “for some time” following periods when the rate of inflation has run below that objective.
The 9:30 central time August Dallas Federal Reserve manufacturing index is expected to be negative 1.0.
U.S. stock index futures continue to have upside momentum.
INTEREST RATE MARKET FUTURES
The “new” flexible Federal Reserve is causing traders to anticipate higher levels of inflation.
Interest rate market futures at the short end of the curve are likely to be supported by ideas that major central banks, including the Federal Reserve, will keep short term interest rates low for an extended period.
However, futures at the long end of the curve, especially the 30-year Treasury bond futures may be undermined by the inflationary aspects of “average inflation targeting.”
The next Federal Open Market Committee meeting is scheduled for September 16. Financial futures markets are predicting there is an 86% probability that the FOMC will maintain its fed funds target rate at zero to 25 basis points. There are growing pressures for additional accommodation from the Federal Reserve.
Risk Warning: Investments in Equities, Contracts for Difference (CFDs) in any instrument, Futures, Options, Derivatives and Foreign Exchange can fluctuate in value. Investors should therefore be aware that they may not realise the initial amount invested and may incur additional liabilities. These investments may be subject to above average financial risk of loss. Investors should consider their financial circumstances, investment experience and if it is appropriate to invest. If necessary, seek independent financial advice.
ADM Investor Services International Limited, registered in England No. 2547805, is authorised and regulated by the Financial Conduct Authority [FRN 148474] and is a member of the London Stock Exchange. Registered office: 3rd Floor, The Minster Building, 21 Mincing Lane, London EC3R 7AG.
A subsidiary of Archer Daniels Midland Company.
© 2024 ADM Investor Services International Limited.
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.