Written Commentary
STOCK INDEX FUTURES
Stock index futures are higher despite yesterday’s hawkish on balance Federal Reserve Chair Jerome Powell’s comments on monetary policy. Mr. Powell said there was “quite a bit of room to raise interest rates.”
The Federal Reserve on Wednesday indicated it could soon raise interest rates for the first time in more than three years. In a move that came as little surprise, the Fed’s policymaking group said a quarter-percentage point increase in its short-term borrowing rate is likely coming soon. It would be the first increase since December 2018.
Durable goods orders in December fell 0.9% when down 0.5% was expected.
Jobless claims in the week ended January 22 were 260,000 when 265,000 were anticipated.
The fourth quarter U.S. gross domestic product increased 6.9% when up 5.7% was estimated.
The 9:00 central time December pending home sales report is estimated to show a 0.6% increase.
Stock index futures are holding up well today
CURRENCY FUTURES
Fed Chair Powell’s comments yesterday, and safe-haven flows of funds in light of ongoing tensions between Ukraine and Russia are supporting the U.S. dollar. The greenback hit its highest level since July 2020.
Now is a good time to take profits on long U.S. dollar positions now that the FOMC meeting is out of the way.
The euro currency depreciated to its weakest level since June 2020.
The Confederation of British Industry’s distributive trades survey’s retail sales balance in the U.K. jumped 20 points from a month ago to +28 in January 2022, which easily beat market expectations of +13.
Financial futures markets have priced in up to four Bank of England interest rate hikes this year, which in the longer term, will likely support the British pound.
An accommodative Bank of Japan will likely result in long-term pressure on the yen.
Yesterday the Bank of Canada held its main interest rate steady at 0.25%, but said rate increases are on the horizon.
INTEREST RATE MARKET FUTURES
The Treasury will auction 7-year notes today.
Many market participants now expect either four or five rate hikes in 2022 compared to 3 to 4 that were anticipated before the FOMC meeting on Wednesday.
Some analysts believe that if the rate of growth in the U.S. economy slows, and also the global economy, it may be difficult for the Federal Reserve to maintain its ramped-up hawkish policy.
Risk Warning: Investments in Equities, Contracts for Difference (CFDs) in any instrument, Futures, Options, Derivatives and Foreign Exchange can fluctuate in value. Investors should therefore be aware that they may not realise the initial amount invested and may incur additional liabilities. These investments may be subject to above average financial risk of loss. Investors should consider their financial circumstances, investment experience and if it is appropriate to invest. If necessary, seek independent financial advice.
ADM Investor Services International Limited, registered in England No. 2547805, is authorised and regulated by the Financial Conduct Authority [FRN 148474] and is a member of the London Stock Exchange. Registered office: 3rd Floor, The Minster Building, 21 Mincing Lane, London EC3R 7AG.
A subsidiary of Archer Daniels Midland Company.
© 2021 ADM Investor Services International Limited.
Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. The information and comments contained herein is provided by ADMIS and in no way should be construed to be information provided by ADM. The author of this report did not have a financial interest in any of the contracts discussed in this report at the time the report was prepared. The information provided is designed to assist in your analysis and evaluation of the futures and options markets. However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright ADM Investor Services, Inc.
