Dollar at New Lows
STOCK INDEX FUTURES
U.S. stock index futures are higher due to vaccine and additional fiscal stimulus hopes.
Investors also are awaiting the Federal Reserve’s two-day policy meeting, which starts on Tuesday.
Stock index futures are performing well for the news suggesting higher prices are likely longer term.
The U.S. dollar index hit its weakest level since May 2018, as safe-haven longs continue to be liquidated.
Longer term, the U.S. dollar is likely to trend lower due to expectations for an extended period of low interest rates and concerns over rising U.S. levels of debt.
The euro currency is higher on news that euro zone industrial production increased 2.1% from a month earlier in October 2020, which is the fastest pace since July and the sixth consecutive month of growth. Market expectations were for a 2.0 % increase.
The British pound advanced as investors are hopeful that the U.K. and the European Union will strike a trade deal after both sides agreed to continue negotiations. Officials on both sides said they were narrowing differences over some of the disputed issues.
The Japanese yen is higher after it was reported that sentiment among Japan’s large manufacturers improved for the second straight quarter due to a recovery in exports and production.
The Bank of Japan’s quarterly tankan survey showed the main index measuring large manufacturers’ sentiment was minus 10 in December compared with minus 27 in September.
INTEREST RATE MARKET FUTURES
Flight to quality longs at the long end of the yield curve are being liquidated.
Financial futures markets are predicting there is a 95.2% probability that the Federal Open Market Committee will keep its fed funds rate unchanged at zero to 25 basis points at the December 16 policy meeting.
In the months ahead the yield curve is likely to steepen, which should put pressure on futures at the long end of the curve, especially the 30-year Treasury bond futures, while futures at the short end of the curve are likely to hold steady.
Risk Warning: Investments in Equities, Contracts for Difference (CFDs) in any instrument, Futures, Options, Derivatives and Foreign Exchange can fluctuate in value. Investors should therefore be aware that they may not realise the initial amount invested and may incur additional liabilities. These investments may be subject to above average financial risk of loss. Investors should consider their financial circumstances, investment experience and if it is appropriate to invest. If necessary, seek independent financial advice.
ADM Investor Services International Limited, registered in England No. 2547805, is authorised and regulated by the Financial Conduct Authority [FRN 148474] and is a member of the London Stock Exchange. Registered office: 3rd Floor, The Minster Building, 21 Mincing Lane, London EC3R 7AG.
A subsidiary of Archer Daniels Midland Company.
© 2021 ADM Investor Services International Limited.
Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. The information and comments contained herein is provided by ADMIS and in no way should be construed to be information provided by ADM. The author of this report did not have a financial interest in any of the contracts discussed in this report at the time the report was prepared. The information provided is designed to assist in your analysis and evaluation of the futures and options markets. However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright ADM Investor Services, Inc.