Written Commentary
STOCK INDEX FUTURES
Stock index futures are lower with reduced optimism surrounding Ukraine and Russia talks.
The 8:45 central time March PMI composite final is expected to be 58.5.
The 9:00 March Institute for Supply Management services index is anticipated to be 58.5.
Futures remain well above downtrend lines.
The dominant fundamental influences remain geopolitical tensions and the hawkish Federal Reserve.
CURRENCY FUTURES
The U.S. dollar index is higher as flight to quality longs are established.
There was some pressure on the euro currency when the euro zone March composite PMI came in at 54.9 when 54.5 was predicted.
Some analysts believe the risk of recession is currently greater in the euro zone than in the U.S.
Canada posted a trade surplus of CAD 2.62 billion in January of 2022, beating market estimates of a CAD 1.6 billion surplus.
The Reserve Bank of Australia held its policy meeting today, and its statement was more hawkish than expected. The RBA kept its official cash rate unchanged, but opened the door to an interest rate increase in the months ahead.
The Japanese yen is lower.
Interest rate differential expectations remain bearish for the Japanese yen and lower prices are likely.
INTEREST RATE MARKET FUTURES
Futures are lower across the board due to deepening concerns about inflation and the monetary policy response.
Federal Reserve speakers today are Neel Kashkari at 9:00, Lael Brainard at 10:05 and John Williams at 1:00.
Traders are keeping a close watch on the yield curve, which measures the spread between short-term and long-term interest rates and is often seen as an indicator of sentiment about the prospects for economic growth.
The Fed has little choice but to increase the pace of fed funds rate hikes given headline inflation rates are the highest since the 1970s and are predicted to go higher.
Currently there is a 74.4% probability of a 50 basis point increase and a 25.6% probability of a 25 basis point hike in the fed funds rate at the May 4 Federal Open Market Committee policy meeting.
Lower prices are likely across the board for the interest rate futures market as most major central banks are anticipated to tighten credit policies this year.
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