Written Commentary
CURRENCY FUTURES
The U.S. dollar index is higher and is hovering near its highest level in almost two months. The flight to quality influence appears to be the main reason for recent strength in the greenback in light of political turmoil in Europe and ongoing tensions in the Middle East.
There are reports that the Bank of Japan may hike its key interest rate at its July meeting. In addition, the Ministry of Finance is under increasing pressure to intervene in foreign exchange markets to prevent further depreciation of the yen.
Australia’s Westpac-Melbourne Institute Consumer Sentiment index increased by 1.7% month- over-month to a 3-month high of 83.6 in June 2024 after a 0.3% decline in May.
STOCK INDEX FUTURES
S&P500 and NASDAQ futures are higher.
The May Chicago Federal Reserve national activity index was 0.18 when -0.40 was expected.
The 9:00 central time June consumer confidence index is anticipated to be 100.0, and the 9:00 June Richmond Federal Reserve manufacturing index is estimated to be 2.
The longer term fundamentals remain supportive to stock index futures.
INTEREST RATE MARKET FUTURES
Prices are mixed at the front end of the yield curve and are higher at the long end of the curve, especially the 30-year U.S. Treasury bond futures.
There was little market reaction when this morning Federal Reserve Governor Michelle Bowman said high interest rates are still needed to lower inflation.
Yesterday San Francisco Federal Reserve Bank President Mary Daly said there is more work for higher interest rates to do to slow demand and inflation in the U.S. economy.
Other Federal Reserve speakers today are Lisa Cook at 11:00 and Michelle Bowman at 1:15 PM
The U.S. Treasury will auction two-year notes.
Financial futures markets are predicting there is a 68% probability that the Federal Open Market Committee will lower its fed funds rate by 25 basis points at its September 18 meeting.
Despite many Fed officials predicting only one fed funds rate reduction this year, financial futures markets are suggesting there will be two 25 basis point rate cuts in 2024.
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