Written Commentary
INTEREST RATE MARKET FUTURES
Futures are higher across the board with prices above downtrend lines.
John Williams of the Federal Reserve will speak at 8:05 central time.
The yield on the 10-year U.S. Treasury note steadied around 4.20%, recovering from a dip in the previous session. Traders assessed Federal Reserve Chair Jerome Powell’s remarks following Wednesday’s Federal Open Market Committee statement.
Approximately three weeks ago there was a major change in the fundamentals and outlook for Federal Reserve policies. The probabilities are increasing that the central bank will more aggressively ease credit conditions this year.
Financial futures markets are predicting the FOMC will lower its key interest rate two or three more times this year with the first reduction at its June policy meeting.
An accommodative FOMC will underpin prices.
CURRENCY FUTURES
The U.S. dollar index is a little higher, although interest rate differentials remain bearish for the greenback.
The Confederation of British Industry’s monthly net balance of new orders declined to -29 in March, from -28 in February, which is well under the long-run average of -13. This is an indication of ongoing struggles in the U.K.’s manufacturing sector.
Japan’s core inflation hit 3.0% in February, which is a sign of broadening price pressures that reinforces market expectations of additional interest rate hikes. The increase in Japan’s core consumer price index, which excludes the effect of volatile fresh food costs, compared with a median market forecast of a 2.9% gain. This kept core inflation above the BOJ’s 2.0% target for the 35th consecutive month.
This data came in after Bank of Japan Governor Kazuo Ueda’s warning, made after its monetary policy decision to keep interest rates steady on Wednesday, that rising food costs and stronger-than-expected wage growth could push up underlying inflation rates.
STOCK INDEX FUTURES
Stock index futures are lower but remain above major downtrend lines.
There are no major economic reports scheduled for today.
While futures recently have been adversely affected by trade tariff issues and geopolitical concerns, in the longer term, a more accommodative Federal Open Market Committee will support futures.
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