Written Commentary
STOCK INDEX FUTURES
Yesterday’s decline in energy prices may have been the catalyst for sharply higher prices. Some of those gains are being given back today.
Jobless claims in the week ended September 3 were 222,000 when 240,000 were expected.
Federal Reserve Chair Powell will speak at 8:00 central time.
The 2:00 July consumer credit report is anticipated to show a $33.0 billion increase.
The hawkish Federal Reserve remains the dominant influence.
CURRENCY FUTURES
Yesterday the U.S. dollar index advanced to its highest level since June 2002 due to expectations that the Federal Reserve will continue to aggressively raise interest rates.
The long term trend for the U.S. dollar is higher as Federal Reserve officials have become even more hawkish in their rhetoric recently.
It is likely that the U.S. dollar index will trade higher today after the overnight pressure.
The euro currency is higher today on news that the European Central Bank increased its key interest rate by 75 basis points from 0% at its policy meeting today.
The British pound rebounded to above $1.15 after yesterday touching the lowest level since 1985. The new U.K Prime Minister announced an energy plan to address soaring energy prices.
Yesterday the Bank of Canada increased its overnight target rate by 75 basis points to 3.25%, following a surprise full-percentage-point increase in July.
INTEREST RATE MARKET FUTURES
Charles Evens of the Federal Reserve will speak at 11:00.
According to financial futures markets, there is an 18.0% probability that the Federal Open Market Committee will hike its fed funds rate by 50 basis points and an 82.0% 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.
The bearish influence of the hawkish Federal Reserve is currently outweighing the bullish influence of a weakening U.S. economy.
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