Written Commentary
STOCK INDEX FUTURES
Stock index futures are higher across the board with June S&P 500 futures bumping up against a five-day downtrend line.
The 9:00 central time April Richmond Federal Reserve manufacturing index is expected to be negative 5.0.
Anticipated interest rate cuts from the Federal Reserve later this year remain an underlying long term supportive influence.
CURRENCY FUTURES
June U.S. dollar index futures fell to a three-year low yesterday due to concerns about the economic outlook for the U.S., along with renewed concerns over the Federal Reserve’s independence. However, there has been some recovery today.
Recently the greenback has registered its steepest declines against the euro currency, the Japanese yen and Swiss franc.
The German government cut its economic forecast for this year and now predicts stagnation instead of 0.3% growth, according to a report by the Handelsblatt newspaper. According to the report, for 2026 the German government now expects growth of 1.0%, which is down slightly from its January forecast of 1.1%.
A spokesman for the economy ministry declined to comment when asked about the forecasts and instead referred to a news conference on the new projections that is planned for Thursday.
Earlier this month, German economic institutes reduced their growth forecast for this year to 0.1% from the 0.8% that was expected in September.
The Japanese yen advanced to near a seven-month high as investors sought safety in light of global trade tensions.
Traders are increasingly betting that the Reserve Bank of Australia will lower interest rates at its May meeting. While a 25 basis-point reduction is widely anticipated, some analysts are pricing in a more aggressive 50 basis-point cut.
INTEREST RATE MARKET FUTURES
Futures are lower at the front of the yield curve and are higher at the long end of the yield curve.
Yesterday Federal Reserve Bank of Chicago President Austan Goolsbee said, “We’ve got short-run inflation expectations up but not long-term.”
The yield on the U.S. 10-year Treasury note increased above 4.40% on Tuesday.
The U.S. Treasury will auction two-year notes today.
Federal Reserve speakers today are Philip Jefferson at 8:00, Patrick Harker at 8:30, Neel Kashkari at 12:40, Thomas Barkin at 1:30 and Adriana Kugler at 5:00.
The Federal Open Market Committee will probably keep its fed funds rate unchanged at 4.25% – 4.50% at its May 7 policy meeting.
However, the Federal Open Market Committee is likely to lower its fed funds rate by 25 basis points four times this year with the first reduction potentially coming at the June policy meeting.
The interest rate market futures have recently underperformed the news.
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