Written Commentary
The Ghost in the Machine Q1 2024
March 19, 2024
STOCK INDEX FUTURES
Stock index futures declined as traders readjust their interest rate outlook and prepare for the Federal Open Market Committee minutes release tomorrow.
The 9:00 central time January leading indicators report is expected to show a 0.3% decline.
Despite lower prices today the fundamentals and technicals remain supportive to stock index futures.
CURRENCY FUTURES
The U.S. dollar index is lower.
However, interest rate differentials remain supportive to the greenback longer term.
The euro currency strengthened on news that new car sales in the European Union increased 12.1% year-on-year in January.
Bank of England Governor Andrew Bailey said inflation does not need to decline to its 2.0% target before policymakers back an interest rate reduction and signaled investors are correct in expecting a policy pivot this year.
Andrew Bailey told Parliament’s Treasury Committee that market expectations on interest rate reductions this year are “not unreasonable.”
INTEREST RATE MARKET FUTURES
March Treasury bond futures fell to their lowest level since December 4, 2023.
There are no Federal Reserve speakers scheduled for today.
Financial futures markets are predicting there is an 8.0% probability that the Federal Open Market Committee will lower its fed funds rate by 25 basis points at the March 20 meeting, and there is a 92% chance that the Fed will keep rates unchanged.
The fundamentals and technicals remain bearish on balance for futures.
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