Written Commentary
STOCK INDEX FUTURES
Stock index futures are higher with much of the strength linked to prospects of a Federal Reserve pivot to accommodation.
The Federal Open Market Committee will release a statement after its policy meeting at 1:00 central time, and Federal Reserve Chair Powell will hold a press conference at 1:30.
Housing starts In August at an annual rate were 1.356 million when 1.300 million were expected, and permits annualized were 1.475 million when 1.410 million were anticipated.
CURRENCY FUTURES
The U.S. dollar index was slightly lower in the overnight trade.
The euro zone August consumer price index increased 0.1% on the month when up 0.2% was estimated.
European Central Bank policymaker Francois Villeroy de Galhau said the central bank is likely to continue with rate cuts.
The annual inflation rate in the U.K. was 2.2% in August, the same as in July, and was in line with expectations. However, the U.K. core inflation rate increased to 3.6% in August from 3.3% in July, which reduces Bank of England rate cut hopes.
The Bank of England will hold its policy meeting on September 19. After cutting rates in August, it is widely expected that the BOE’s Monetary Policy Committee will maintain the base rate at 5.0%.
Japan’s August exports increased 5.6% on the year, which compares to the forecast of an increase of 10.6%.
The Bank of Japan will hold its policy meeting on September 20. The central bank will probably keep its short-term interest rate at the current level of 25 basis points.
INTEREST RATE MARKET FUTURES
Futures are mostly lower today. However, yesterday the December 30-year U.S. Treasury bond futures advanced to the highest level since July of 2023.
The Fed is anticipated to lower the fed funds rate today, which currently stands at a 23-year high of 5.25%-5.50%. This would be the first rate cut since March 2020.
Currently there is a 63% probability that the Federal Open Market Committee will lower its funds rate by 50 basis points today, and there is a 37% probability that the FOMC will reduce its key interest rate by 25 basis points.
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