Written Commentary
CURRENCY FUTURES
The U.S. dollar index declined when the weaker than expected on balance employment numbers were released. The greenback fell under a five-week congestion pattern.
German industrial output increased 1.0% month-over-month in January 2024, marking the first expansion in nine months and surpassing market predictions of 0.6% growth.
The euro zone fourth quarter gross domestic product was unrevised at 0.0% growth on a quarter-to-quarter basis, which was as forecast.
Japanese consumer spending in January declined by the most in 35 months. Household spending in January decreased by 6.3% from a year earlier and was down for the 11th straight month. That was worse than the median market forecast for a 4.3% decline.
The gauge for Japan’s service sector improved to 51.3 in February 2024 from 50.2 in the previous month.
STOCK INDEX FUTURES
Stock index futures advanced when the February employment report was released, which provides more reason for the Federal Reserve to pivot to accommodation this year.
Nonfarm payrolls in February increased 275,000 when up 190,000 was expected. Private payrolls were up 223,000 when a gain of 150,000 was anticipated.
However, manufacturing payrolls were down 4,000 when an increase of 10,000 was predicted, and the unemployment rate was 3.9% when 3.7% was forecast. Average hourly earnings were disappointing, increasing only 0.1% when up 0.3% was predicted.
The fundamentals are mostly bullish, while and technicals remain supportive to stock index futures.
INTEREST RATE MARKET FUTURES
This week, Federal Reserve Chair Powell told the Congress the central bank still needs to become more confident that inflation is moving sustainably at 2.0% before cutting interest rates, although it is close to it.
Futures firmed when the on balance weaker than predicted employment numbers were reported.
Financial futures markets are predicting there is a 5.0% probability that the Federal Open Market Committee will lower its fed funds rate by 25 basis points at the March 20 meeting, and there is a 95% chance that the Fed will keep rates unchanged.
While futures at the long end of the curve are technically looking better, the fundamentals and technicals remain bearish on balance for futures at the short end of the yield curve.
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