Interest Rate Market Likely to Trend Higher

STOCK INDEX FUTURES

Stock index futures are higher as investors debated just how aggressive the Federal Reserve will have to be in its effort to cool historically high inflation.

Second-quarter earnings season continues this week. Corporate earnings have mostly been stronger than expected.

Despite an ongoing hawkish tone to Federal Reserve officials’ comments, stock index futures are holding up well.

CURRENCY FUTURES

The Swiss franc is higher after it was reported that the Swiss unemployment rate stood at a non-seasonally adjusted 2.0% in July 2022, the same as in June, which was the lowest reading since November 2001. The number of unemployed people fell by 1,037, or 1.1% to 91,474.

On Friday it was reported that Canadian employment levels unexpectedly fell for a second straight month in July, as workers continued to drop out of the labor force. The jobless rate remained at record lows.

The economy lost 30,600 jobs last month, according to Statistics Canada. This was a surprise negative reading since economists predicted a 15,000 gain. The jobless rate remained at 4.9%, because the labor force also declined by a similar amount.

The Japanese yen is higher despite news that a measure of Japan’s service sector sentiment fell by 9.1 points to 43.8 in July 2022 from 52.9 in June, which was the lowest reading since February.

INTEREST RATE MARKET FUTURES

Futures are mixed at the front of the yield curve and are higher at the long end of the curve.

The  inverted Treasury yield curve continues to flash warnings of economic risks.

According to financial futures markets, there is a 31.5% probability that the Federal Open Market Committee will hike its fed funds rate by 50 basis points and a 68.5% probability that the rate will increase by 75 basis points at the September 21 policy meeting.

Higher prices are likely across the board for the interest rate market futures, despite the hawkish Federal Reserve.

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