Written Commentary
STOCK INDEX FUTURES
The 8:45 central time June U.S. manufacturing PMI is expected to be 52.0.
The 9:00 June Institute for Supply Management manufacturing index is anticipated to be 55.0 and the 9:00 May construction spending report is predicted to show a 0.5% increase.
The rate of inflation remains the key driver to this market. A likely bottom could come when there are indications that the rate of inflation is slowing, which could influence the Federal Reserve to become less hawkish.
Stock index futures are lower this morning but are likely to trade higher later today.
CURRENCY FUTURES
The U.S. dollar index is higher as interest rate differential expectations remain supportive, since the Federal Reserve is likely to hike interest rates more than other major central banks.
The U.S. dollar will probably continue to trade higher.
The euro currency is lower despite news that euro zone Inflation increased to a record high of 8.6% in June after climbing 8.1% in May. Economists had forecast euro zone inflation at 8.4% in June.
The British pound is lower on news that the U.K. manufacturing slowdown continues as business optimism fell to the lowest level in over two years.
INTEREST RATE MARKET FUTURES
The 30-year Treasury bond futures advanced to a three-week high.
There is an 80.8% probability that the Federal Open Market Committee will hike its fed funds rate by 75 basis points and a 19.2% probability that the rate will increase by 50 basis points at the July 27 meeting.
Economic growth is slowing, maybe even sooner than expected, which should allow the Fed to soften its policy stance at some point.
Copper futures, which often predict economic trends, fell to a 17-month low.
On Thursday, the Federal Reserve Bank of Atlanta’s “GDPNow” estimate was lowered to a 1.0% decline in gross domestic product in the second quarter, compared with a 0.3% increase estimated earlier this week.
The next surprise from the Federal Reserve, not right away but later this year will be a shift to less hawkish rhetoric.
Financial futures markets are now predicting the Fed could return to accommodation late in 2023.
The fundamental and technical aspects of the interest rate market futures are improving.
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