Written Commentary
CURRENCY FUTURES
The U.S. dollar index is higher in a flight to safety move in light of increasing possibilities of a wider conflict in the Middle East.
In addition, the greenback has been supported by interest rate differentials that have turned more favorable.
Major central bank policies are diverging with the Federal Reserve likely to remain restrictive for longer, while other major central banks are likely to become accommodative sooner.
The U.K. economy expanded 0.1% month-over-month in February 2024, following an upwardly revised 0.3% increase in January and matching market forecasts.
The Japanese yen depreciated past 153 per U.S. dollar, hitting a new 34-year low. The yen has declined despite repeated warnings of possible Bank of Japan intervention in foreign exchange markets.
STOCK INDEX FUTURES
Stock index futures are lower due to increasing tensions in the Mideast.
Import prices in March increased 0.4% when up 0.3% was expected, and export prices were up 0.3% as anticipated.
The 9:00 central time April consumer sentiment index is estimated to be 79.0.
Increasing geopolitical worry is a reason to stand aside in stock index futures today.
However, in the longer term the fundamentals are mostly bullish, while the technicals remain supportive to stock index futures.
INTEREST RATE MARKET FUTURES
Futures are higher in a flight to safety move in light of increasing tensions in the Mideast.
Federal Reserve speakers today are Jeffrey Schmid at 12:00, Raphael Bostic at 1:30 and Mary Daly at 2:30.
Financial futures markets are predicting there a only 2% probability that the Federal Open Market Committee will lower its fed funds rate by 25 basis points at the May 1 policy meeting. The FOMC will likely keep interest rate unchanged at its June 12 and July 31 policy meetings as well. However, there is now a 75% probability of a rate reduction at the September 18 meeting.
Futures will probably remain firm today due to flight to safety support. However, in the longer term, the fundamentals and technicals for futures are bearish on balance.
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