Written Commentary
CURRENCY FUTURES
The U.S. dollar index advanced to new highs for the move and is at its highest level since July 10.
Much of the strength in the U.S. dollar is linked to flight to quality buying in light of geopolitical tensions in the Middle East and favorable interest rate differentials.
The fundamentals and technicals remain supportive to the U.S. dollar and higher prices are likely.
According to the German Chamber of Commerce and Industry, the German economy will contract by 0.2% this year, reducing its previous forecast published in May, for a stagnation.
Traders have fully priced in a 25 basis point interest rate cut from the European Central Bank in December.
The Japanese yen is lower and fell to its lowest level against the U.S. dollar since July 23. This prompted Japan’s finance minister to say he is closely watching foreign exchange moves with a higher sense of vigilance.
STOCK INDEX FUTURES
Stock index futures are lower.
The September retail inventories report showed an increase of 0.8% when up of 0.3% was expected.
September wholesale inventories were down 0.1%, which compares to the anticipated increase of 0.1%.
The 9:00 central time October consumer confidence index is forecast to be 99.1, and the 9:00 September Job Openings and Labor Turnover Survey (JOLTS) is estimated to show 7.9 million.
INTEREST RATE MARKET FUTURES
Futures are steady to higher at the front of the yield curve and are lower at the long end of the yield curve.
The December 30-year U.S. Treasury bond futures declined to the lowest level since July 3.
The U.S. Treasury will auction seven-year notes.
Currently there is a 95% probability that the Federal Open Market Committee will lower its fed funds rate by 25 basis points at its November 7 policy meeting, and there is a 5% chance that the FOMC will keep its key interest rate unchanged at 4.75% – 5.00%.
Futures at the short end of the yield curve are likely to continue to gain on futures at the long end of the yield curve.
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