Written Commentary
STOCK INDEX FUTURES
Stock index futures are lower after yesterday’s comments from Federal Reserve Chairman Jerome Powell and European Central Bank President Christine Lagarde, which suggested they would keep hiking interest rates to rein in inflation even if their economies slowed.
Jobless claims in the week ended June 25 were 231,000 when 226,000 were expected.
Personal income in May increased 0.5% as anticipated, and personal consumption expenditures were up only 0.2% when a gain of 0.5% was estimated.
The 8:45 central time June Chicago PMI is predicted to be 58.4.
The rate of inflation remains the key driver to this market. A likely bottom could come when there are indications that the rate of inflation is slowing, which could influence the Federal Reserve to become less hawkish.
Futures are likely to at least partially recover this afternoon.
CURRENCY FUTURES
The U.S. dollar index is higher as interest rate differential expectations remain supportive, since the Federal Reserve is likely to hike interest rates more than other major central banks.
The U.S. dollar will probably continue to trade higher.
The euro currency is lower even though the jobless rate in the euro zone in May fell to 6.6% from a revised figure of 6.7% in April, and is below the forecast of 6.8%.
U.K. household incomes are in the longest-ever run of declines with real incomes falling for four straight quarters.
INTEREST RATE MARKET FUTURES
Lower stock index futures and weaker industrial commodity prices supported futures. The 30-year Treasury bond futures advanced to a three-week high.
There is an 82.0% probability that the Federal Open Market Committee will hike its fed funds rate by 75 basis points and a 18.0% probability that the rate will increase by 50 basis points at the July 27 meeting.
Economic growth is slowing, maybe even sooner than expected, which should allow the Fed to soften its policy stance at some point. Financial futures markets are now predicting the Fed could return to accommodative late in 2023.
The fundamental and technical aspects of the interest rate market futures are improving.
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