Written Commentary
STOCK INDEX FUTURES
The main event today will be the release of a statement at the conclusion of the Federal Open Market Committee’s policy meeting.
Mortgage applications declined 9.0% in the week ended January 27.
The Automated Data Processing Inc. employment change report showed an increase of 106,000 when up 158,000 were expected.
The 8:45 central time January PMI manufacturing final is anticipated to be 46.8.
There are three 9:00 reports. The January Institute for Supply Management manufacturing index is predicted to be 48.0. The December construction spending report is estimated to be -0.1%, and the December Job Openings and Labor Turnover Survey (JOLTS) report is expected to show 10.2 million. The JOLTS report tracks monthly changes in job openings and offers rates on hiring and quits.
Stock index futures are likely to trade sideways as traders even up positions ahead of today’s Federal Open Market Committee statement and Fed Chair Powell’s press conference.
CURRENCY FUTURES
The U.S. dollar index is lower and remains in a two-week trading range.
Interest rate differentials are neutral for the U.S. dollar.
Euro zone inflation eased for third month. January’s reading came in at 8.5%, which is less than economists’ estimates of a slowdown to 8.9%.
Traders are positioning for big monetary policy events this week, with the Federal Reserve decision due today and both the Bank of England and the European Central Bank on Thursday. Both the BoE and the ECB are set to hike their key interest rates by 50 basis points.
INTEREST RATE MARKET FUTURES
The Federal Reserve will likely slow the pace of tightening due to mounting evidence that inflation in the U.S. has begun to ease.
According to financial futures markets, currently there is almost a 100.0% probability that the Federal Open Market Committee will increase its fed funds rate by 25 basis points at today’s policy meeting.
The long term outlook for futures is higher.
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