Written Commentary
STOCK INDEX FUTURES
Stock index futures are holding up well despite yesterday’s hawkish comments from Federal Reserve Chairman Jerome Powell.
The 9:00 central time March Richmond Federal Reserve manufacturing index is expected to be 0.
The dominant influences remain geopolitical tensions and the hawkish Federal Reserve.
CURRENCY FUTURES
The U.S. dollar index remains firm as the Ukraine conflict showed little sign of receding.
The British pound is higher on news that the Confederation of British Industry’s order book balance increased to 26 in March of 2022, matching November’s all-time high of 26 and beating market estimates of 16.
The U.K. government recorded a £13.1 billion deficit in its public finances in February of 2022, which is much higher than market expectations of £8.1 billion. This is the second highest February borrowing since monthly records began in 1993.
The Japanese yen is sharply lower, falling to a new 6-year low.
Interest rate differential expectations suggest the Japanese yen will trend lower.
INTEREST RATE MARKET FUTURES
Fed Chair Powell’s comments at the National Association for Business Economics meeting Monday set a more hawkish tone saying he is ready to back a half-point hike in the fed funds rate in May if inflation continues to run hot.
Powell also repeated that the Fed’s reductions to its massive balance sheet could begin by May.
Today James Bullard of the Federal Reserve said the Fed needs to move aggressively on rate increases and 50-basis point increases definitely are in the mix.
John Williams of the Federal Reserve will speak at 9:30.
The part of the yield curve that measures the change between two-year and 10-year yields flattened, which is a sign that traders worry that Fed tightening will hurt the economy.
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