Written Commentary
STOCK INDEX FUTURES
Stock index futures are mixed as investors remain concerned about the debt ceiling.
Talks will continue today on averting a U.S. default as key differences remain.
Stock index futures have performed well very in 2023 despite a variety of bearish news.
Some of the major stock index futures last week advanced to new highs for the year.
CURRENCY FUTURES
The U.S. dollar index declined on Friday with follow-through pressure today after Federal Reserve Chair Jerome Powell said interest rates may not have to increase as much as previously expected given the turmoil in the banking sector.
In addition, Minneapolis Fed Bank President Neel Kashkari today said he is open to the central bank adopting a wait and see approach at the next policy meeting. He said, “I am open to the idea that we can move a little bit more slowly from here.” However, he cautioned against reading too much into a June pause. “If we were to skip in June, that does not mean we are done with our tightening cycle. It means to me we are getting more information,” he added.
European Central Bank board member Schnabel expressed the view that the central bank should continue its fight to limit inflation “with determination,” while ECB President Lagarde emphasized that policymakers will take necessary steps to overcome inflationary pressures.
Industrial production in Switzerland increased 3.4% year-on-year in the first quarter of 2023, easing from a downwardly revised 5.9% gain in the previous three-month period. This marked the weakest growth since the fourth quarter of 2020.
The Japanese yen declined on news that Japan’s core machinery orders fell in March for a second month. Japan’s March core machinery orders declined 3.9% when an increase of 0.8% was predicted.
INTEREST RATE MARKET FUTURES
There was only limited support for futures on Friday when Fed Chair Powell said the central bank may opt not to hike interest rates in June.
In addition to Neel Kashkari, other Federal Reserve speakers today are Thomas Barkin at 9:50 central time and Mary Daly at 10:05.
Financial futures markets are predicting there is a 73% probability that the Federal Open Market Committee will keep its fed funds rate unchanged at its June 14 policy meeting, and there is a 27% chance of a 25 basis point increase.
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