Written Commentary
STOCK INDEX FUTURES
Stock index futures are lower due to hawkish remarks from Federal Reserve officials last week.
Federal Reserve Governor Christopher Waller warned on Friday “core inflation is not coming down like I thought it would.” Richmond Fed President Thomas Barkin said he was “comfortable” with additional interest rate increases given that inflation was still not on the path back to 2.0%.
Housing starts in May were 1.631 million when 1.400 million were expected and permits were 1.491 million when 1.433 million were anticipated.
Federal Reserve Chair Jerome Powell will testify before the House of Representatives Financial Services Committee tomorrow at 9:00, and before the Senate Banking Committee on Thursday at 9:00 as part of his semi-annual report on U.S. monetary policy to lawmakers.
Futures continue to overperform the news.
CURRENCY FUTURES
After falling to four-week low last week, the U.S. dollar index is higher today.
German producer prices increased at their slowest pace in over two years in May. Producer prices of industrial products were up 1.0% compared with May 2022, which was the lowest producer inflation since January 2021.
Analysts estimated an increase of 1.7% year-on-year, after producer prices in April increased 4.1% on the year.
INTEREST RATE MARKET FUTURES
New York Fed’s John Williams and Fed Vice Chair Michael Barr will speak at an event at 10:45 central time.
Financial futures markets are predicting there is a 77% probability that the Federal Open Market Committee will hike its fed funds rate by 25 basis points at the July 26 meeting, and there is a 23% chance that the fed funds rate will remain unchanged.
Last week the Federal Open Market Committee indicated there will be two more fed funds rate hikes this year. However, financial futures markets pricing suggests the FOMC can only increase rates one more time in 2023.
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