Written Commentary
CURRENCY FUTURES
The U.S. dollar index is lower despite recent hawkish comments from Federal Reserve officials.
The euro currency advanced on news business sentiment in Germany was higher in April for a sixth consecutive month, as expectations for the next six months improved despite the pressures of high inflation and increasing interest rates. The Ifo index is based on a poll of approximately 9,000 companies in manufacturing, services, trade and construction.
Markets are now fully pricing in a 25 basis point rate hike from the European Central Bank at its policy meeting on May 4.
Additional Bank of England interest rate increases are likely after recent strong economic data. The next Bank of England policy meeting is scheduled for May 11.
Bank of Japan Governor Kazuo Ueda indicated he saw little need to change the central bank’s monetary stimulus policy ahead of his first policy meeting on April 28, as the BOJ’s chief.
Interest rate differentials suggest lower prices for the U.S. dollar and higher prices for the euro currency.
STOCK INDEX FUTURES
The March Chicago Federal Reserve National Activity Index was -.19, which compares to the -.19 reading in February. The index is a monthly index that tracks overall economic activity and inflationary pressures.
The 9:30 central time April Dallas Federal Reserve Manufacturing Index is anticipated to be -11.5. This survey tracks factory activity in Texas on a monthly basis.
Stock index futures have performed very well recently despite a variety of bearish news.
INTEREST RATE MARKET FUTURES
There are no major Federal Reserve speakers scheduled for today.
Underlying support for futures remains due to the belief that central banks will not be able to keep raising interest rates much longer.
Markets are currently pricing in a 25 basis point rate increase at the Fed’s May 3 policy meeting. However, easier credit conditions from the Federal Reserve are likely later this year.
The June 30-year Treasury bond futures double-bottom breakout to the downside on April 19 appears to be a false sell signal with futures now trading higher than the double-bottom price.
The technicals and fundamentals remain supportive.
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