Written Commentary
STOCK INDEX FUTURES
Stock index futures are partially recovering today from yesterday’s pressure that was due to increased geopolitical worries.
Federal Reserve Chair Powell’s prepared remarks have been released in advance of his 9:00 central time testimony before the House Financial Services committee.
Powell said company hiring and inflation data in January have not altered the Federal Reserve’s expectation that it will be appropriate to lower interest rates later this year, but officials want more evidence that inflation is slowing sustainably.
The February ADP employment report showed an increase of 140,000 when a gain of 150,000 was expected.
The 9:00 January job openings and labor turnover survey (JOLTS) is anticipated to be 8.9 million, and the 9:00 January wholesale inventories report is predicted to show a 0.1% decline.
The fundamentals are mostly bullish, while and technicals remain supportive to stock index futures.
CURRENCY FUTURES
The U.S. dollar index is lower but remains in a five-week congestion pattern.
Interest rate differentials remain supportive to the greenback longer term.
The Bank of Canada and the European Central Bank are both scheduled to announce their policy decisions this week. Forecasts suggest the BoC will likely keep its key interest rate steady at 5.00% today, and the ECB is expected to do the same and keep its key interest rate at 4.50% on Thursday.
German exports increased 6.3% in January compared with the previous month. This compares with a forecast of a 1.5% increase.
Retail sales in the euro area increased 0.1% month-over-month in January 2024, following a revised 0.6% contraction in December and was in line with market expectations.
Real gross domestic product in Australia increased 0.2% in the fourth quarter, which is below the estimate of a 0.3% increase.
INTEREST RATE MARKET FUTURES
Ranges are narrow and volume is light ahead of Fed Chair Powell’s congressional testimony this morning.
In addition to Fed Chair Powell, other Federal Reserve speakers today are Mary Daly at 11:00 and Neel Kashkari at 3:15.
Financial futures markets are predicting there is a 3.0% 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 97% chance that the Fed will keep rates unchanged.
The fundamentals and technicals remain bearish on balance for futures, especially at the short end of the yield curve.
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