Sentiment Rises in Hopes of Avoidance of Gov’t Shutdown

STOCK INDEX FUTURES

Stock index futures are higher. Sentiment improved in light of signs that lawmakers in Washington will successfully avert a government shutdown.

However, investors remain focused on escalating trade tensions under President Donald Trump and their potential impact on the U.S. economy.

The 9:00 central time March consumer sentiment index is expected to be 64.0.

Several downside blow-off indicators have taken place this week, indicating lows for the move may be close.

In the longer term, a more accommodative Federal Open Market Committee will support futures.

CURRENCY FUTURES

The U.S. dollar index is lower as interest rate differentials have turned against the greenback.

Germany’s wholesale prices increased 1.6% year-on-year in February 2025, accelerating from 0.9% growth in the previous month and easily beating market estimates of a 0.2% advance. This was the third consecutive month of increase and was the strongest pace since March 2023.

The U.K. economy unexpectedly contracted. Gross domestic product declined 0.1% in January when economists had forecast a monthly expansion of 0.1%.

INTEREST RATE MARKET FUTURES

Flight to quality longs are being liquidated as lawmakers in Washington moved closer to avoiding a government shutdown.

The yield on the U.S. 10-year Treasury note edged up toward 4.32% on Friday.

There are no Federal Reserve speakers this week since the pre-FOMC ‘blackout’ period just started. The blackout period begins on the second Saturday before a Federal Open Market Committee meeting and ends on the Thursday following the meeting. The next FOMC policy meeting is scheduled for March 19.

Two weeks ago there was a major change in the fundamentals and outlook for Federal Reserve policies. The probabilities are increasing that the central bank will more aggressively ease credit conditions this year.

Financial futures markets are predicting the FOMC will keep its fed funds rate unchanged at its March and May meetings but will lower its key interest rate three more times this year with the first reduction at its June policy meeting.

An accommodative FOMC will underpin prices.

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