Written Commentary
STOCK INDEX FUTURES
Nonfarm payrolls in August increased 315,000 when 318,000 were expected.
The unemployment rate increased to 3.7% when 3.5% was anticipated.
Average hourly earnings increased 0.3% when a gain of 0.4% was predicted.
The 9:00 central time July factory orders report is estimated to show a 0.2% increase.
In summation the employment report was slightly weaker than expected.
CURRENCY FUTURES
The U.S. dollar index advanced to a 20-year high yesterday.
The long term trend for the U.S. dollar is higher as Federal Reserve officials have become even more hawkish in their rhetoric this week.
Producer prices in the euro area jumped 4.0% month-over-month in July of 2022, which is the biggest increase in four months, and much higher than market forecasts of 2.5%.
The European Central Bank may raise its key interest rate by 75 basis points at its policy meeting on September 8 in response to Wednesday’s record high inflation reading.
The Japanese yen fell to a 24-year low today as the Federal Reserve is expected to continue to hike interest rates aggressively, while the Bank of Japan has now held short-term rates in negative territory for more than six years.
INTEREST RATE MARKET FUTURES
According to financial futures markets, there is a 40.0% probability that the Federal Open Market Committee will hike its fed funds rate by 50 basis points and a 60.0% probability that the rate will increase by 75 basis points at the September 21 policy meeting.
Prior to the today’s employment report there was a 70.0% probability that the Fed will hike the fed funds rate by 75 basis points later this month.
The inverted Treasury yield curve continues to flash warnings of economic risks ahead.
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