Fundamentals Support the U.S. Dollar
STOCK INDEX FUTURES
Stock index futures are slightly higher after sharp declines yesterday.
The 8:45 central time August PMI composite index is expected to be 49.2.
The 9:00 July new home sales report is anticipated to show 575,000 and the 9:00 August Richmond Federal Reserve manufacturing index is estimated to be -3.0.
Stock index futures are likely to have a hard time advancing this week ahead of the Federal Reserve’s annual Jackson Hole, Wyoming economic symposium on August 25-27. Federal Reserve Chairman Jerome Powell will likely stress that tightening has a long way to go when he speaks on Friday.
The U.S. dollar advanced to new highs for the move today as interest rate differential expectations are becoming more supportive to the U.S. dollar.
Recently, Federal Reserve policymakers have pointed out that a dovish pivot is unlikely despite signs that inflation could be peaking.
Higher prices are likely for the U.S. dollar this week in advance of Fed Chair Powell’s likely hawkish comments at Jackson Hole on Friday.
The euro currency fell to under the $1.00, the lowest level since late 2002, as recession fears in Europe reemerged.
The S&P Global Germany Composite PMI declined to 47.6 in August of 2022 from 48.1 in July, compared to market forecasts of 47.4.
The Confederation of British Industry’s order book balance fell to -7.0 in the three months to August of 2022 from 8.0 in July, and compared to market forecasts of 3.0. This reading pointed to the first decline in industrial output since April of 2021.
INTEREST RATE MARKET FUTURES
The Treasury will auction 2-year notes.
Neel Kashkari of the Federal Reserve will speak at 6:00 p.m.
According to financial futures markets, there is a 43.5% probability that the Federal Open Market Committee will hike its fed funds rate by 50 basis points and a 56.5% probability that the rate will increase by 75 basis points at the September 21 policy meeting.
The inverted Treasury yield curve continues to flash warnings of economic risks ahead.
Futures will have a hard time rallying this week ahead of the Federal Reserve’s Jackson Hole economic symposium.
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