Written Commentary
CURRENCY FUTURES
The euro currency is not far from its one-year peak hit last week, as the European Central Bank is expected to announce its seventh consecutive interest rate hike on Thursday. Markets are fully pricing in a 25 basis point interest rate increase.
A Bank of England interest rate increase is likely when the central bank meets on May 11.
The final au Jibun Bank Japan manufacturing purchasing managers’ index was up slightly to 49.5 in April from March’s 49.2, and matching the flash reading. New orders contracted at the softest rate since July, while remaining under the 50.0 threshold for the tenth consecutive month.
The consumer confidence index in Japan increased to 35.4 in April of 2023 from 33.9 in the previous month, which was the highest reading since January 2022.
Australian home prices increased for a second month in April.
The Reserve Bank of Australia is likely to hold its key interest rate unchanged at its policy meeting tomorrow.
Longer term, interest rate differentials suggest lower prices for the U.S. dollar and higher prices for the euro currency.
STOCK INDEX FUTURES
Stock index futures are mixed, although banking worries remain.
The 8:45 central time April PMI manufacturing final is expected to be 50.4.
The 9:00 April Institute for Supply Management manufacturing index is anticipated to be 46.8.
The 9:00 March construction report is estimated to be up 0.1%.
Futures have performed very well this year despite the higher interest rates from the Federal Reserve.
INTEREST RATE MARKET FUTURES
The Federal Open Market Committee is on track to hike interest rates again on Wednesday, while deliberating whether that will be enough to then pause the fastest rate-increasing cycle in 40 years.
Another 25 basis point increase would lift the benchmark fed funds rate to a 16-year high of 5.00%-5.25%. The Fed began increasing rates from near zero in March 2022.
Underlying support for futures remains due to the belief that central banks will not be able to keep raising interest rates much longer.
The technicals and fundamentals remain supportive.
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