SIFs Higher Despite Hawkish Fed

STOCK INDEX FUTURES

Stock index futures are higher, as traders focus on corporate results and ahead of key economic data, including consumer and producer inflation reports at the end of the week.

Futures are higher despite hawkish comments from Federal Reserve Governor Michelle Bowman who said more interest rate hikes will likely be needed.

The 2:00 central time June consumer credit report is expected to show a $14.1 billion increase.

Stock index futures are higher despite Michelle Bowman’s hawkish comments, which suggest follow-through gains are likely.

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CURRENCY FUTURES

The euro currency was pressured by further evidence of an economic slowdown in the euro zone, limiting the possibility that the European Central Bank will extend its tightening cycle at its  September policy meeting.  The ECB increased borrowing costs by another 25 basis points last month, and President Lagarde underscored that the central bank’s upcoming decision will be determined by the latest economic data.

The euro currency is lower today on news that industrial production in Germany declined 1.5% month-over-month in June 2023, which is worse than the market consensus of a 0.5% fall and following a downwardly revised 0.1% drop in May.

The British pound showed little reaction to news that the Halifax house price index fell 2.4% year-on-year in July 2023, after a 2.6% decline in June, which was the steepest drop since June 2011.

INTEREST RATE MARKET FUTURES

Lower futures prices are linked to hawkish comments from Federal Reserve Governor Michelle Bowman. Speaking at a meeting of the Kansas Bankers Association in Colorado on Saturday, Bowman said she expects “additional rate increases will likely be needed to get inflation on a path down to the 2.0% target.”

Most market participants still see the Federal Reserve leaving its fed funds rate steady when it meets next month.

Financial futures markets are predicting there is an 84% probability that the Federal Open Market Committee will keep its fed funds rate unchanged at its September 20 policy meeting, and there is a 16% probability of a 25 basis point increase.

The Federal Open Market Committee’s 25 basis point hike in its fed funds rate on July 26 is probably the last one in this cycle.

 

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