Written Commentary
The Ghost in the Machine Q1 2024
March 19, 2024
CURRENCY FUTURES
Inflation expectations among euro zone consumers for the next 12 months eased to 4.9% from 5.0% a month earlier, while expectations three years out fell more sharply to 2.5% from 3.0%.
Factory orders in Germany increased 1.0% month-over-month in January of 2023, following an upwardly revised 3.4% increase in December, and beating market predictions of a 0.9% decline.
Japan’s real wages fell the most in almost nine years in January. Inflation adjusted real wages declined by 4.1% in January from a year earlier, which is the largest decrease since May 2014. This followed a revised 0.6% drop in December.
The Bank of Japan’s latest policy decision is due Friday. The central bank is predicted to keep short term interest rates unchanged at negative 10 basis points.
The Reserve Bank of Australia raised its cash rate by 25 basis points to 3.6% at its policy meeting today, matching the market consensus. This was the tenth rate hike since May 2022, which brought borrowing costs to their highest rate since May 2012.
STOCK INDEX FUTURES
Stock index futures are higher as U.S. Treasury yields retreated further from recent highs.
The 9:00 central time January wholesale inventories report is expected to show a 0.4% decline.
The 2:00 January consumer credit report is anticipated to show a $24.6 billion increase.
Federal Reserve Chair Jerome Powell is scheduled to testify before the Senate Banking Committee at 9:00. The testimony will be closely watched for signals about the economy and interest rate policies.
INTEREST RATE MARKET FUTURES
Federal Reserve Chair Jerome Powell’s testimony today is likely to echo what other Fed officials have recently said, suggesting interest rates will go higher than policymakers anticipated just a few weeks ago if economic data comes is strong.
The Treasury will auction three-year notes today.
Most likely the Federal Open Market Committee will increase its fed funds rate by 25 basis points at its March 22 policy meeting, and there is more talk of another 25 basis point hike at the May meeting.
The technical aspects of the interest rate market futures have improved in the past three trading days.
The severely inverted yield curve is becoming even more inverted but continues to get very little attention.
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