Written Commentary
STOCK INDEX FUTURES
The main event today is Federal Reserve Chairman Jerome Powell’s speech at the Kansas City Federal Reserve’s 44th Annual Economic Policy Symposium. This virtual event will include international central bankers, Federal Reserve officials, academics and private sector economists participating via an online, live-streamed format.
Stock index futures advanced when Chairman Jerome Powell called for a “robust updating” of Federal Reserve policy. The central bank formally agreed to a policy of “average inflation targeting,” which means it will allow inflation to run “moderately” above the Fed’s 2.0% goal “for some time” following periods when inflation has run below that objective.
The second quarter gross domestic product contracted 31.7%, which compares to the expected 32.9% decline.
Jobless claims in the week ended August 22 were 1,006,000 when 987,000 were anticipated.
The 9:00 central time July pending home sales index is estimated to be up 1.5%
The 10:00 August Kansas City Federal Reserve manufacturing index is predicted to be 2.
U.S. stock index futures continue to have upside momentum.
CURRENCY FUTURES
The U.S. dollar was higher in the overnight trade, but quickly declined when Federal Reserve Chair Powell called for a policy of average inflation targeting.
Some of the bears on the greenback for a while have speculated that the Federal Reserve may loosen its approach to inflation and now, they have.
Longer term, the U.S. dollar is likely to trend lower.
The euro currency is higher after a report showed M3 money supply growth in July in the euro zone increased 10.2% on the year when an increase of 9.2% was expected.
INTEREST RATE MARKET FUTURES
The thirty-year Treasury bond futures came under pressured due to the inflationary aspects of the Fed’s average inflation targeting policy.
Thomas Barkin of the Federal Reserve will speak at 11:30.
The Treasury will auction seven-year notes today.
Interest rate market futures at the short end of the curve are likely to be supported by ideas that major central banks, including the Federal Reserve, will keep short term interest rates low for an extended period.
The next Federal Open Market Committee meeting is scheduled for September 16. Financial futures markets are predicting there is an 88% probability that the FOMC will maintain its fed funds target rate at zero to 25 basis points.
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