Written Commentary
The Ghost in the Machine Q1 2024
March 19, 2024
INTEREST RATE MARKET FUTURES
Futures are holding up very well today despite mostly bearish news, which is a sign of strength.
Financial futures markets are now suggesting the Federal Open Market Committee will hike its fed funds rate by 25 basis points at its policy meeting on March 22, and there is a smaller chance the central bank may make no change in interest rates.
Currently there is a 72% probability the FOMC will hike by 25 basis points and a 28% probability of no change in the fed funds rate.
STOCK INDEX FUTURES
Stock index futures are lower.
February housing starts were 1.450 million when 1.315 million were expected and building permits were 1.524 million when 1.340 million were anticipated.
Jobless claims in the week ended March 11 were 192,000 when 205,000 were predicted.
The March Philadelphia Federal Reserve manufacturing index was negative 23.2, which compares to the estimated negative 15.8. The prices paid index was 23.5 when 27.0 was expected.
Import prices in February were down 0.1% when a decline of 0.2% was anticipated and export prices were down 1.1% when an increase of 0.2% was estimated.
CURRENCY FUTURES
The European Central Bank at its policy meeting today increased its deposit rate by 50 basis points to 3.0% from 2.5%. Most analysts were predicting a 50 basis point hike with a minority expecting only a 25 basis point increase.
The Bank of England is seen hiking interest rates by 25 basis points on March 23. Some analysts believe this could be the last increase in this current policy tightening cycle.
Japan’s core machinery orders increased 9.5% on the month in January when a gain of 1.8% was expected.
The Australian dollar advanced on news that Australia’s seasonally adjusted unemployment rate fell to 3.5% in February 2023 from January’s eight-month high of 3.7% and below market estimates of 3.6%. The number of unemployed decreased by 16,500 to 507,500.
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