Written Commentary
CURRENCY FUTURES
The U.S. dollar index is higher in a flight to quality move.
Business sentiment in Germany edged higher in April for the sixth consecutive month, as expectations for the next six months improved. The Ifo business-climate index increased to 93.6 in April from 93.2 in March, which is the highest level since February 2022. However, it fell slightly behind expectations of 93.8. 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.
The Confederation of British Industry’s monthly gauge of industrial orders remained at -20 in April. This is unchanged from the March reading that had marked a more than two-year low.
Economists believe the Bank of Japan will keep policies unchanged at its April 28 meeting.
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 lower due to renewed concerns about the banking system.
The 9:00 central time April consumer confidence index is expected to be 104.0 and the 9:00 March new home sales report is anticipated to show a total of 634,000.
The April Richmond Federal Reserve manufacturing index will be released at 9:00. In March the figure was -5.0.
In the near term stock index futures will have difficult time advancing in light of banking concerns and the likely fed funds rate hike at the Federal Open Market Committee’s May 3 policy meeting.
INTEREST RATE MARKET FUTURES
Flight to quality buying is supporting futures.
Longer-term 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 technicals and fundamentals remain supportive.
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