Written Commentary
INTEREST RATE MARKET FUTURES
Futures are performing well despite the Automated Data Processing, Inc. employment report coming in more than predicted.
The Federal Open Market Committee will conclude its two-day policy meeting today. A statement will be released at 1:00 P.M. central time and Federal Reserve Chairman Jerome Powell will hold a press conference at 1:30.
According to financial futures markets currently, there is a 90.0% probability that the Federal Open Market Committee will increase its fed funds rate by 75 basis points and a 10.0% probability that the rate will be hiked by 50 basis points.
Just a few weeks ago there was a 98.0% probability of a 75 basis point increase and a 2.0% chance of a 100 basis point hike.
STOCK INDEX FUTURES
Today is the second day of the two-day Federal Open Market Committee meeting.
The October Automated Data Processing, Inc. employment report showed an increase of 239,000 when a gain of 200,000 was expected.
Mortgage applications in the week ended October 28 were down 0.5%.
Prospects of a less hawkish Federal Reserve later this year have supported stock index futures in recent weeks.
The technicals are becoming more supportive.
Stock index futures are likely to firm once the Federal Open Market Committee statement is out of the way.
CURRENCY FUTURES
The U.S. dollar index is lower despite the bullish Automated Data Processing, Inc. employment number coming in more than predicted, which is a sign of weakness.
The U.S. dollar index probably come under additional selling pressure once the FOMC meeting is out of the way.
The October euro zone manufacturing PMI was 46.4 when 46.6 was anticipated.
The trade surplus in Germany declined to 9 billion euros in September of 2022 from 16.1 billion euros a year earlier.
In a recent survey a majority of economists said they expect the Bank of England will hike its key interest rate by 75 basis points at its policy meeting tomorrow.
The Japanese yen strengthened as Bank of Japan Governor Haruhiko Kuroda hinted at a possible adjustment in the yield curve control policy, “if the achievement of our 2.0% inflation target comes into sight.”
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