ECB Forum This Week in Portugal

STOCK INDEX FUTURES

Stock index futures are higher as signs of slowing economic growth and falling commodity prices eased expectations over how high the Federal Reserve will raise interest rates to rein in inflation.

Recent economic reports, on balance, have indicated the U.S. economy, and potentially inflation, may be beginning to cool off. The latest evidence came Friday as the University of Michigan revised lower its June reading of inflation expectations over the next five to 10 years to 3.1% from 3.3%.

Durable goods in May increased 0.7% when a gain of 0.1% was expected.

The 9:00 central time May pending home sales index is anticipated to  show a 2.5% decline.

The June Dallas Federal Reserve manufacturing index will be released at 9:30. The May report was negative 7.3.

The rate of inflation remains the key driver to this market. A likely bottom could come when there are indications that the rate of inflation is slowing, which could influence the Federal Reserve to become less hawkish.

CURRENCY FUTURES

The European Central Bank starts a three-day forum today in Portugal, which is just a few days after its policymakers made clear that it would be raising interest rates next month. Recently a jump in Italian bond yields prompted the ECB to announce it was devising an “anti-fragmentation” tool.

The main event will be Wednesday’s panel discussion, which includes ECB President Christine Lagarde, Federal Reserve Chair Jerome Powell and Bank of England Governor Andrew Bailey, for insights on how the central banks view the trade-off between curbing inflation, while still trying to ensure a soft-landing for the global economy.

INTEREST RATE MARKET FUTURES

The Treasury will auction five-year notes today.

This year the Federal Open Market Committee will continue on its path of hiking the fed funds rate.

There is a 93.9% probability that the Federal Open Market Committee will hike its fed funds rate by 75 basis points and a 6.1% probability that the rate will increase by 50 basis points at the July 27 meeting.

Currently the Federal Reserve’s focus is clearly on inflation, while a slowing economy will be problem for the Fed to deal with later. Economic growth is slowing, maybe even sooner than expected, which should allow the Fed to soften at some point.

Financial futures markets are now predicting the Fed could return to accommodative late in 2023.

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.

© 2021 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.

Latest News & Market Commentary

Explore the latest edition of The Ghost in the Machine

Explore Now