CPI Increase Supports the Dollar
STOCK INDEX FUTURES
Stock index futures were higher in the overnight trade but quickly declined when the U.S. consumer price index was released.
The August consumer price index report showed a 0.1% increase when a 0.1% decline was expected. The consumer price index, excluding food and energy, was up 0.6% when a gain of 0.3% was anticipated.
The National Federation of Independent Business small business optimism index for August was 91.8 when 90.5 was estimated.
Tomorrow’s August producer price index is anticipated to be down 0.1%.
Investors believe Fed officials will continue to tighten policy this year.
In spite of sharply lower prices today, futures remain above major downtrend lines.
The U.S. dollar index was lower in the overnight trade but quickly advanced when the increase in the U.S. consumer price index was released.
The long term trend for the U.S. dollar is higher as Federal Reserve officials have become even more hawkish in their rhetoric recently.
In light of today’s consumer price index report, interest rate differential expectations have turned more bullish for the greenback.
The ZEW Indicator of Economic Sentiment for Germany declined for a third month to -61.9 in September of 2022 from -55.3 in August, hitting the lowest since October of 2008, and was worse than market forecasts of -60.
The Bank of England delayed its next interest rate policy decision by a week to September 22.
INTEREST RATE MARKET FUTURES
Futures quickly declined when the August U.S. consumer price index was released.
The Treasury will auction 30-year bonds today.
According to financial futures markets, there is an 82.0% probability that the Federal Open Market Committee will hike its fed funds rate by 75 basis points and an 18.0% probability that the rate will increase by 100 basis points at the September 21 policy meeting.
The inverted Treasury yield curve continues to flash warnings of economic risks ahead.
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