U.S. Dollar at a New High
STOCK INDEX FUTURES
Mortgage applications fell 5.4% in the week ended July 1.
The 8:45 central time June PMI composite final is expected to be 51.6.
The 9:00 June Institute for Supply Management services index is anticipated to be 54.
The 9:00 May Job Openings and Labor Turnover Survey (JOLTS) is estimated to show 11.25 million.
The minutes from the Federal Open Market Committee’s June 15 policy meeting will be released at 1:00.
The rate of inflation remains the key driver to this market. A likely bottom could come when there are indications that the rate of inflation is slowing, which could influence the Federal Reserve to become less hawkish.
Stock index futures are lower this morning but are likely to trade higher after the Fed’s minutes are released.
The U.S. dollar index is trading at its highest level against the euro currency in 20 years as interest rate differential expectations remain supportive. The Federal Reserve is likely to hike interest rates more than other major central banks.
The U.S. dollar will probably continue to trade higher.
Retail sales in the euro area edged 0.2% higher in May over April 2022, missing market forecasts of a 0.4% increase.
German manufacturing orders increased slightly in May, beating forecasts for a decline.
Manufacturing orders in Germany increased 0.1% on the month in adjusted terms. Economists had expected orders to fall by 0.3%.
INTEREST RATE MARKET FUTURES
The 30-year Treasury bond futures advanced to a five-week high.
John Williams of the Federal Reserve will speak at 8:00.
There is an 87.9% probability that the Federal Open Market Committee will hike its fed funds rate by 75 basis points and a 12.1% probability that the rate will increase by 50 basis points at the July 27 meeting.
Economic growth is slowing, maybe even sooner than expected, which should allow the Fed to soften its policy stance at some point.
Copper, which is a leading indicator of the health of the global economy, extended losses toward a level not seen since November 2020.
A closely watched part of the U.S. Treasury yield curve inverted again yesterday, as investors continue to price in the chance that the Federal Reserve’s aggressive move to lower inflation will push the economy into a recession.
The next surprise from the Federal Reserve, not right away but later this year, will be a shift to less hawkish rhetoric.
Financial futures markets are now predicting the Fed could return to accommodation late in 2023.
The fundamental and technical aspects of the interest rate market futures are improving.
Risk Warning: Investments in Equities, Contracts for Difference (CFDs) in any instrument, Futures, Options, Derivatives and Foreign Exchange can fluctuate in value. Investors should therefore be aware that they may not realise the initial amount invested and may incur additional liabilities. These investments may be subject to above average financial risk of loss. Investors should consider their financial circumstances, investment experience and if it is appropriate to invest. If necessary, seek independent financial advice.
ADM Investor Services International Limited, registered in England No. 2547805, is authorised and regulated by the Financial Conduct Authority [FRN 148474] and is a member of the London Stock Exchange. Registered office: 3rd Floor, The Minster Building, 21 Mincing Lane, London EC3R 7AG.
A subsidiary of Archer Daniels Midland Company.
© 2021 ADM Investor Services International Limited.
Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. The information and comments contained herein is provided by ADMIS and in no way should be construed to be information provided by ADM. The author of this report did not have a financial interest in any of the contracts discussed in this report at the time the report was prepared. The information provided is designed to assist in your analysis and evaluation of the futures and options markets. However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright ADM Investor Services, Inc.