Written Commentary
CURRENCY FUTURES
The U.S. dollar index is lower today after falling to over a four-month low last week.
Lower prices are likely for the U.S. dollar longer term.
Business sentiment in Germany declined for the first time in four months. The Ifo business-climate index fell to 86.4 in December from a revised 87.2 in November, according to data from the Ifo Institute. This was below expectations of 87.7 from economists.
The Bank of Japan will hold its policy meeting on December 19. Analysts will be looking for hints about a possible end to the central bank’s negative interest rate policy. The Bank of Japan is widely expected to keep the world’s last negative interest rate unchanged on Tuesday.
STOCK INDEX FUTURES
Stock index futures are higher following gains last week that were inspired by a recently dovish Federal Reserve.
The 9:00 central time December housing market index is expected to be 36.
The fundamentals and technicals remain supportive to stock index futures.
INTEREST RATE MARKET FUTURES
Futures were higher last week after the Federal Open Market Committee’s policy statement and Federal Reserve Chair Powell’s press conference took a turn to the dovish side, which opened the door to interest rate cuts in 2024. Most officials predicted three interest rate reductions next year in economic projections released after their two-day meeting last Wednesday.
However, since then some policymakers, including New York Fed President John Williams and Atlanta Fed President Raphael Bostic, pushed back against these expectations.
Also, today Federal Reserve Bank of Cleveland President Loretta Mester said financial markets had gotten “a little bit ahead” of the central bank on when to expect interest rates to be lowered.
Financial futures markets are predicting there is a 10% probability that the Federal Open Market Committee will reduce its fed funds rate by 25 points at its January 31, 2024 policy meeting and a 90% probability of no change.
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