Written Commentary
STOCK INDEX FUTURES
Stock index futures are higher despite a growing view that the Federal Reserve may be even slower to pivot to accommodation.
The National Federation of Independent Business Small Business Optimism Index in the U.S. declined for a third consecutive month to 88.5 in March 2024, which is the lowest since December 2012 and is well under forecasts of 90.2.
The fundamentals are mostly bullish, while the technicals remain supportive to stock index futures.
CURRENCY FUTURES
The U.S. dollar index is lower.
The European Central Bank will hold its policy meeting on Thursday, and it is widely anticipated that the ECB will maintain current interest rates. However, traders see a 90% probability that the central bank will reduce its key interest rate by 25 basis points at its June meeting with three cuts fully priced in for 2024.
The Japanese yen weakened toward 152 per U.S. dollar prompting new verbal intervention from monetary authorities. Finance Minister Shunichi Suzuki today said authorities would not rule out any measures in dealing with excessive yen moves, repeating warnings he made in previous statements.
The Bank of Canada at its policy meeting tomorrow is expected keep its target for the overnight rate unchanged at 5.0% for a sixth-consecutive time.
Australian consumer sentiment weakened further in early April, according to a private survey. The Westpac-Melbourne Institute consumer sentiment index fell 2.4% in April, extending a 1.8% decline from the previous month.
INTEREST RATE MARKET FUTURES
Futures are higher this morning after yesterday futures fell to new lows for the move.
The Treasury will auction three-year notes.
Neel Kashkari of the Federal Reserve said the central bank cannot stop short on the inflation fight and needs to get to its 2.0% target.
There is increasing speculation that Federal Reserve monetary policy could remain restrictive for longer.
Financial futures markets are predicting there is a 2% probability that the Federal Open Market Committee will lower its fed funds rate by 25 basis points at the May 1 policy meeting, and there is a 98% chance that the Fed will keep rates unchanged.
There is now only a 48% probability of a fed funds rate reduction at the June 12 meeting. Rate cut probabilities have moved out to July with a 70% chance of a rate reduction at the July 31 policy meeting.
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