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.

CURRENCY FUTURES

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.

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