Written Commentary
CURRENCY FUTURES
Yesterday the U.S. dollar index fell to its lowest level since mid-January on the belief that a weaker U.S. economy will prompt the Federal Reserve to pivot more aggressively to accommodation.
Longer term, the U.S. dollar is likely to trend lower.
Retail sales in the euro area fell 0.3% month-over-month in June, which is more than expectations of a 0.1% decrease.
Factory orders in Germany increased 3.9% month-over-month in June, which is above market forecasts of up 0.8% and was the first increase since last December.
Analysts are currently expecting the European Central Bank will lower its key interest rate by 50 basis points at its September meeting.
The Reserve Bank of Australia kept its cash rate target unchanged at 4.35% as expected at its policy meeting today.
Japan’s June all-household spending declined 1.4% on the year when down 0.9% was anticipated.
Financial futures markets are predicting the Bank of Japan will increase its key interest rates two more times this fiscal year that ends March 2025. The next increase is likely at its December 19 policy meeting.
STOCK INDEX FUTURES
Fears of recession pressured stock index futures yesterday. However, there is a partial recovery today.
Coming easier credit policies from the Federal Reserve will eventually rescue stock index futures.
However, in the meantime there are better opportunities in the currencies and interest rate market futures.
INTEREST RATE MARKET FUTURES
Yesterday San Francisco Federal Reserve Bank President Mary Daly said the labor market is slowing, and inflation is coming down toward the 2.0% target.
The U.S. Treasury will auction 52-week bills and three-year notes today.
There is now a 74% probability that the Federal Open Market Committee will lower its fed funds rate by 50 basis points at its September 18 meeting, and there is a 26% probability that the Fed will lower its rate by 25 basis points.
Higher prices are likely for the interest rate market futures longer term.
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