Written Commentary
INTEREST RATE MARKET FUTURES
The Federal Open Market Committee is on track to hike interest rates again today, while deliberating whether that will be enough to then pause the fastest rate-increasing cycle in 40 years.
Another 25 basis point increase would lift the fed funds rate to a 16-year high of 5.00%-5.25%.
Underlying support for futures remains due to the belief that central banks will not be able to keep raising interest rates much longer.
The technicals and fundamentals remain supportive.
STOCK INDEX FUTURES
The Automated Data Processing Inc. employment report showed an increase of 296,000 when up 143,000 was expected.
Mortgage applications in the U.S. fell 1.2% in the week ended April 28, following a 3.7% gain in the previous week, according to data from the Mortgage Bankers Association.
The 8:45 central time April PMI services index is anticipated to be 53.7.
The 9:00 April Institute for Supply Management services index is predicted to be 51.7.
Today is the second day of the Federal Open Market Committee’s two-day policy meeting. The FOMC will release a statement at 1:00 and Federal Reserve Chairman Powell will hold a press conference at 1:30.
CURRENCY FUTURES
The euro currency is higher on news that the seasonally adjusted unemployment rate in the euro area decreased slightly to 6.5% in March 2023, marking the lowest rate on record and coming in just under market expectations of 6.6%.
The European Central Bank is expected to announce its seventh consecutive interest rate hike on Thursday with markets fully pricing in a 25 basis point interest rate increase.
U.K. economists expect just one more 25 basis point interest rate hike from the Bank of England on May 11 even though inflation remains in double digits.
Retail sales in Australia increased 0.4% in March versus a predicted 0.3% gain. In February, retail sales increased 0.2%.
Longer term, interest rate differentials suggest lower prices for the U.S. dollar and higher prices for the euro currency.
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