Written Commentary
CURRENCY FUTURES
The U.S. dollar index is higher today after yesterday hitting the highest level since June 7. In recent weeks flight to quality buying has been a supportive factor as well as the recently more hawkish comments from Federal Reserve officials.
In addition, interest rate differential expectations have turned more favorable this week for the greenback, especially against the European currencies, since the U.S. economy appears to be holding up relatively well compared to the euro zone economy.
The U.S. dollar will probably remain firm ahead of Fed Chair Powell’s speech tomorrow.
The British pound is lower on news that the Confederation of British Industry’s monthly balance of retail sales dropped 19 points from a month ago to -44 in August 2023, suggesting trade has fallen at the fastest rate since March 2021. However, the expectations for the upcoming month improved slightly from -32 to -21.
The Australian dollar is lower after Australia’s 10-year government bond yield fell below 4.2%, retreating sharply from over nine-year highs.
STOCK INDEX FUTURES
Stock index futures are higher due to better than expected earnings, especially in the tech sector.
Jobless claims in the week ended August 19 were 230,000 when 241,000 were expected.
Durable goods orders in July were down 5.2% when a decline of 4.4% was anticipated.
The July Chicago Federal Reserve national activity index was 0.12 when -0.30 was estimated.
Fed Chair Powell will speak on Friday morning at the annual Jackson Hole Economic Symposium, which starts today.
Many analysts believe Powell’s comments will be hawkish on balance.
INTEREST RATE MARKET FUTURES
Federal Reserve Chairman Jerome Powell’s speech on Friday is anticipated to be in line with his message after July’s Federal Open Market Committee meeting.
Financial futures markets are now predicting there is an 83% probability that the Federal Open Market Committee will keep its fed funds rate unchanged at its September 20 policy meeting, and there is a 17% probability of a 25 basis point increase.
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