Written Commentary
The Ghost in the Machine Q1 2024
March 19, 2024
INTEREST RATE MARKET FUTURES
The minutes from the Fed’s November 1-2 policy meeting released Wednesday showed central bank officials believe it would “become appropriate to slow the pace of increase in the target range for the federal funds rate.”
That suggestion reinforced the view that the central bank will hike interest rates by 50 basis points at its next meeting rather than the 75 basis point hike it voted for at each of its past four meetings.
According to financial futures markets currently, there is a 71.0% probability that the Federal Open Market Committee will increase its fed funds rate by 50 basis points at the December 14 meeting and a 29.0% probability that the rate will be hiked by 75 basis points.
Despite lower prices today the fundamental and technical aspects have turned more constructive
STOCK INDEX FUTURES
Stock index futures were higher on Wednesday with some follow-through today after the release of the latest Federal Open Market Committee meeting minutes showed a substantial majority of policymakers agreed it would soon be appropriate to slow the pace of interest rate hikes, while pointing to increased recessionary risks.
The fundamentals and technicals for stock index futures are improving.
CURRENCY FUTURES
The U.S. dollar index declined on Wednesday when the minutes from the most recent Federal Open Market Committee meeting were released, although there is some rebound today.
In the last two months interest rate differential expectations have turned against the greenback.
Lower prices are likely for the greenback today from the currently higher levels.
The German economy grew in the third quarter more than initially estimated. According to a second estimate, Germany’s gross domestic product increased by an adjusted 0.4% from the previous period. Economists had forecast a 0.3% expansion.
The Tokyo core consumer price index increased more than expected to a 40-year high in November.
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