Index Futures Continue To Decline

STOCK INDEX FUTURES

Stock index futures are lower today in a continuing decline after on Wednesday when the Federal Open Market Committee indicated it plans fewer interest rate reductions next year than previously anticipated. The Federal Reserve now projects only two interest rate cuts in 2025, which is down from the four cuts it had forecast in September.

Personal income in November increased 0.3% when up 0.4% was expected, and personal consumption expenditures were up 0.4%, which compares to the anticipated gain of 0.5%.

The 9:00 central time December consumer sentiment index is anticipated to be 74.0, and year ahead inflation expectations are forecast to be 2.9%.

down trend chart

CURRENCIES

After making a new high for the move in the overnight trade, the U.S. dollar index is lower today. Some of the pressure on the greenback today can be linked to this morning’s release of the slightly smaller than expected increases in personal income and consumption expenditures.

Producer prices in Germany unexpectedly increased by 0.1% year-on-year in November 2024, rebounding from a 1.1% decline in the previous month, beating market expectations of a 0.3% drop.

Retail sales in the U.K. edged up 0.2% month-over-month in November 2024, rebounding from a 0.7% decline in October but below forecasts of an increase of 0.5%.

Retail sales in Canada increased 0.6% in October from September.

The U.S. dollar index is likely to at least partially recover today from the morning pressure.

The fundamentals and technicals remain supportive to the U.S. dollar, and higher prices are likely longer term.

The fundamentals and technicals remain bearish for the euro currency and the British pound, and lower prices are likely longer term.

INTEREST RATES

Recent declines in futures are due to the hawkish statement from the Federal Open Market Committee meeting on Wednesday. However, prices are higher today as a result of the smaller than expected increases in personal income and personal consumption expenditures.

Mary Daly of the Federal Reserve said progress on inflation has slowed relative to what we wanted and the risks to the outlook are equally balanced.

There is an 89% probability that the Federal Open Market Committee will keep its fed funds rate unchanged at 4.25% – 4.50% at its January 29, 2025 policy meeting, and there is an 11% chance of a 25 basis point reduction.

The U.S. economy is likely to perform well, which may cause the FOMC will be slower to add accommodation in 2025 than the consensus view.

 

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