Written Commentary
INTEREST RATE MARKET FUTURES
Futures are lower across the board after this weekend Federal Reserve Governor Michelle Bowman said it is not time for the U.S. central bank to consider cutting its interest rate target and noted that more interest rate hikes could be on the table if progress on lowering inflation stalls.
She said a further hawkish turn is not out of the question for the Federal Reserve. Bowman said, “While it is not my baseline outlook, I continue to see the risk that at a future meeting we may need to increase the policy rate further should progress on inflation stall or even reverse.”
Neel Kashkari of the Federal Reserve will speak at 6:00 PM.
There is increasing speculation that Federal Reserve monetary policy could remain restrictive for longer.
Financial futures markets are predicting there is a 5% probability that the Federal Open Market Committee will lower its fed funds rate by 25 basis points at the May 1 policy meeting, and there is a 95% chance that the Fed will keep rates unchanged.
There is now only a 48% probability of a fed funds rate reduction at the June 12 meeting. Rate cut probabilities have moved out to July with a 69% chance of a rate reduction at the July 31 policy meeting.
The fundamentals and technicals for futures are bearish on balance.
STOCK INDEX FUTURES
Stock index futures are higher despite recent Federal Reserve officials’ comments that indicate the Fed may be even slower to pivot to accommodation.
No major economic reports are scheduled for today.
The fundamentals are mostly bullish, while the technicals remain supportive to stock index futures.
CURRENCY FUTURES
The U.S. dollar index is a little lower.
Germany’s industrial production Increased more than expected in February. Output of production in manufacturing, energy and construction moved up 2.1% compared to the previous month from an upwardly revised 1.3% gain in January. The reading beat a forecast of a 0.3% increase.
A gauge for Japan’s service sector declined to 49.8 in March 2024 from 51.3 in the previous month. This was the lowest figure since January 2023.
Japanese workers’ real wages fell in February for a 23rd consecutive month. Inflation adjusted real wages fell 1.3% in February from a year earlier. This followed a revised decline of 1.1% in January.
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