ECB to Hike Interest Rates in July

STOCK INDEX FUTURES

The Organization for Economic Co-operation and Development this week lowered its forecast for global growth this year by 1.5 percentage point to 3.0%, and warned that sharp interest rate increases by central banks could reduce growth further.

Traders are watching economic data closely for clues about the Federal Reserve’s path for raising interest rates.

A key test for markets will be Friday’s release of the May consumer price index. The closely watched inflation gauge is expected to increase 8.2% in May from a year earlier, according to economists. This estimate is lower than the April actual figure of up 8.3%. Excluding food and energy, price growth is anticipated to cool slightly to an annual rate of 5.9% in May from 6.2% the previous month.

Jobless claims in the week ended June 4 were 229,000 when 210,000 were expected.

Stock index futures remain in a 9-day congestion pattern.

CURRENCY FUTURES

The euro currency is higher. The European Central Bank held its policy meeting today and committed to a quarter-point increase in interest rates next month and opened the door to a larger hike in the fall as it confronts record inflation.

The ECB said in a statement that it would increase its key interest rate from minus 0.5% to zero or higher by September, and probably further after that. In addition, it said it would end its large-scale bond-buying program on July 1.

The ECB said it intends to hike its key rate by 25 basis points at its next policy meeting in July, and to increase it again in September, possibly by more than 25 basis points.

Demand for U.K. homes fell for the first time since August last month in an early indication that rising interest rates are taking a toll on the property market.

INTEREST RATE MARKET FUTURES

The Treasury will auction 30-year bonds today.

Federal Reserve officials have indicated they plan to raise interest rates by half a percentage point at next week’s policy meeting, and by the same amount again in July.

Financial futures markets are predicting there is a 97.5% probability that the Federal Open Market Committee will hike its fed funds rate by 50 basis points and a 2.5% probability that the  rate will increase by 75 basis points at the June 15 policy meeting.

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