Written Commentary
CURRENCY FUTURES
The U.S. dollar index is higher and at the highest level since June 7. In recent weeks flight to quality buying has been a supportive factor as well as the recently more hawkish comments from Federal Reserve officials.
The HCOB Euro Zone Composite PMI fell to 47.0 in August 2023 from 48.6 in the previous month, which is well below market expectations of 48.5, according to a preliminary estimate.
The HCOB Germany Composite PMI dropped to 44.7 in August 2023 from 48.5 in July, which was substantially under the forecast of 48.3, a preliminary estimate revealed.
The British pound fell to near its lowest level since June 29 in response to weaker-than-expected PMI data. The latest survey showed U.K. business activity contracted more than estimated in August. The S&P Global/CIPS U.K. PMI dropped to 47.9 in August 2023 from 50.8 in July, falling under the market consensus of 50.3, according to a preliminary estimate.
Japan’s factory activity contracted for a third straight month in August, according to a private sector survey.
The au Jibun Bank flash Japan manufacturing purchasing managers’ index inched up to a seasonally adjusted 49.7 in August from 49.6 in July but remained below the 50.0 index point threshold, which separates contraction from expansion.
The manufacturing sector in Australia continued to contract in August, and at a faster pace. The latest survey from Judo Bank showed a manufacturing PMI score of 49.4, which is down from 49.6 in July.
STOCK INDEX FUTURES
Stock index futures are higher due to overnight downward pressure on global interest rates.
The 8:45 central time August manufacturing PMI is expected to be 48.8.
The 9:00 July new home sales report is anticipated to show 705,000.
Fed Chair Powell will speak on Friday morning at the annual Jackson Hole Economic Symposium, which will start on Thursday.
Many analysts believe Powell’s comments will be hawkish on balance.
INTEREST RATE MARKET FUTURES
Evidence of a weakening global economy supported futures.
The Treasury will auction 20-year bonds today.
Financial futures markets are now predicting there is an 86% probability that the Federal Open Market Committee will keep its fed funds rate unchanged at its September 20 policy meeting, and there is a 14% probability of a 25 basis point increase.
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