Written Commentary
STOCK INDEX FUTURES
Stock index futures are higher despite yesterday’s report of negative second quarter growth in GDP, which puts the U.S. economy in recession.
Personal income in June increased 0.6% when up 0.5% was expected.
The 8:45 central time July Chicago PMI is anticipated to be 56.
The 9:00 July consumer sentiment index is estimated to be 51.1.
Futures have recently been supported by the belief that the Federal Open Market Committee is becoming less hawkish.
Also, the technical aspects are becoming more friendly.
CURRENCY FUTURES
The euro currency firmed on news that the euro zone economy expanded 0.7% on the quarter in the three months to June of 2022, beating market forecasts of a 0.2% gain.
Euro zone Inflation increased to a record high of 8.9% in July, hitting its highest level ever. Economists had forecast euro zone inflation to be unchanged at 8.6% in July.
The long term trend for the euro is lower and the long term trend for the U.S. dollar is higher.
The British pound is lower on news that U.K. business confidence declined.
Canada’s May GDP was unchanged from April.
INTEREST RATE MARKET FUTURES
Currently the Federal Reserve’s focus is clearly on inflation, while a slowing economy will be problem for the Fed to deal with later.
There is a 70.0% probability that the Federal Open Market Committee will hike its fed funds rate by 50 basis points and a 30.0% probability that the rate will increase by 75 basis points at the September 21 policy meeting.
Financial futures markets are now predicting the Fed could return to being accommodative late in 2023.
Higher prices are likely across the board for the interest rate market futures as the U.S. economy is likely to continue to weaken.
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