Written Commentary
CURRENCY FUTURES
The U.S. dollar index is lower and continues to underperform.
The euro currency advanced after European Central Bank Governing Council member Francois Villeroy de Galhau said the European Central Bank should keep raising interest rates, even at a reduced pace, until inflation excluding energy and food prices start to ease.
Industrial production in German increased 0.6% month-over-month in September of 2022, rebounding from an upwardly revised 1.2% decline in August and beating market forecasts of a 0.2% increase.
The S&P Global euro zone construction PMI declined to 44.9 in October 2022 from 45.3 in September, signaling a sixth consecutive monthly contraction in output. The housing sector contracted by the most since May 2020 and commercial projects declined at a faster rate.
STOCK INDEX FUTURES
Stock index futures are higher on renewed prospects of a less hawkish Federal Reserve later this year.
The 2:00 central time September consumer credit report is expected to show a $32.0 billion increase.
Stock index futures are performing well for the news.
INTEREST RATE MARKET FUTURES
On Friday Susan Collins of the Federal Reserve signaled support for continuing to hike interest rates but at a somewhat slower pace than the central bank has moved this year to avoid risks of too much tightening. She said, “In my view, smaller increments will often be appropriate as we work to determine how much tightening is needed to reach a level of the funds rate that is sufficiently restrictive. It is time to shift focus from how rapidly to raise rates, or the pace, to how high.”
Federal Reserve speakers today are Loretta Mester at 2:40, Susan Collins at 2:40 and Thomas Barkin at 5:00.
According to financial futures markets currently, there is a 57.0% probability that the Federal Open Market Committee will increase its fed funds rate by 50 basis points at the December 14 meeting and a 43.0% probability that the rate will be hiked by 75 basis points.
I anticipate Federal Reserve speakers this week may walk back some of Fed Chair Powell’s hawkish comments that he made at his FOMC press conference on Wednesday.
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