U.S. Dollar Likely to Trend Higher

STOCK INDEX FUTURES

Early today railroads and labor unions reached a tentative labor agreement to avert a strike.

Retail sales in August increased 0.3% when unchanged was expected and retail sales excluding vehicles fell .0.3% when unchanged was anticipated.

Jobless claims in the week ended September 10 were 213,000 when 228,000 were estimated.

The September Philadelphia Federal Reserve manufacturing index was negative 9.9 when 3.1 was predicted.

The September Empire State manufacturing index was negative 1.5 when negative 12.8 was expected.

Industrial production in August was down 0.2% when an increase of 0.2% was anticipated and capacity utilization was 80.0% when 80.3% was estimated.

The 9:00 July business inventories report is expected to show a 0.6% increase.

The dominant fundamental is the hawkish Federal Reserve.

CURRENCY FUTURES

The U.S. dollar index is lower. On the daily chart there is triple top in the September U.S. dollar index at 109.92, which will probably be taken out in the next few days.

The long term trend for the U.S. dollar is higher as Federal Reserve officials have become even more hawkish in their rhetoric recently.

In addition, interest rate differential expectations have turned more bullish for the greenback.

Wholesale prices in Germany increased 18.9% year-on-year in August of 2022, following a 19.5% gain in July and easing for the fourth consecutive month.

The Japanese yen remains near a 24-year low despite signs that the Bank of Japan is preparing an intervention to prop up the currency. Japanese authorities have been stepping up verbal warnings with the yen down almost 20.0% against the U.S. dollar this year.

The unemployment rate in Australia increased to 3.5% from a 48-year low of 3.4% in July.

INTEREST RATE MARKET FUTURES

Futures are mostly lower but firmed when the 7:30 U.S. economic reports were released.

According to financial futures markets, there is a 78.0% probability that the Federal Open Market Committee will hike its fed funds rate by 75 basis points and a 22.0% probability that the rate will increase by 100 basis points at the September 21 policy meeting.

The inverted Treasury yield curve continues to warn of economic risks ahead.

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