Light Volume Following Delayed Start

STOCK INDEX FUTURES

Trading in various CME products including, currencies, stocks, Treasuries, and commodities was halted overnight halted due to cooling issue at a data center provider used by the exchange. All major indexes are higher following the resumption of trading as optimism that the Fed will cut rates in December gave stocks a nice tailwind. All major indexes are set to end the month lower, following a major pullback earlier in the month as investors repositioned portfolios amid worries in the AI trade. Markes will close early, and volume is expected to be light.

In premarket trading, Alphabet (Google), Tesla, AMD and Nvidia were higher. No major economic data is due for release today.

CURRENCY FUTURES

US DOLLAR: The USD index is higher, although is set to end the week lower in its worst weekly performance since July as markets have added to bets of a rate cut from the Fed in December. Dovish commentary from several Fed officials, including key Powell ally NY Fed President John Williams, has led Fed Funds futures to imply an 87% chance of a December cut, up substantially from 39% earlier in the month. The large swing in odds underscores the divide among members at the FOMC on how to move on policy, and in conjunction with a lack of data, market odds were largely driven by Fed officials. Looking ahead, the resumption of normal data releases will offer a better understanding of how the economy is performing and more specifically, a greater look at the labor market, which has been a focal point for several officials at the Fed.

EURO: The euro is down 0.25% against the dollar to 1.1566 following a wave of economic data out of the eurozone. Retail sales in Germany sank 0.3%, missing forecasts of a 0.2% rise, as a fall in non-food sales and online retail weighed on the headline figure despite increases in sales in retail trade. On the inflation front, regional CPI figures showed German inflation holding just above the ECB’s 2% target. Elsewhere, inflation in France and Italy came in below forecasts at 0.9% and 1.2%, respectively, while Spain’s rate eased to 3.0%, in line with forecasts. Consumer inflation expectations in the eurozone rose to 2.8% in October from 2.7% in September. Expectations for inflation three years ahead were unchanged at 2.5%, as were inflation expectations for five years ahead, which remained steady at 2.2%. Well-anchored longer-term inflation expectations, along with recent inflation data reinforce the view that the European Central Bank will hold rates steady well into 2026.

BRITISH POUND: The pound is 0.2% lower against the dollar at 1.3209 as it heads for its best weekly performance since August following the announcement of Finance Minister Rachel Reeves’s autumn budget. The budget largely calmed markets, which were worried about the government’s ability to maintain fiscal discipline, helping strengthen the currency over the week. The budget plans to raise taxes by £26 billion, while avoiding income tax raises and sees new forecasts expecting higher inflation than previous estimates. Tax changes regarding the new budget leave out any increases on income taxes and national insurance thresholds – until 2030. Instead, gambling duties, properties over £2 million, and a 2-point rise in dividend taxes all face tax increases. Elsewhere on its forecasts, the OBR expects GDP to average a 1.5% growth over the next five years. Inflation is now forecast to hit 3.5% this year, slightly above the March projection of 3.2%, with next year’s estimate lifted from 2.1% to 2.5%. Markets still see around an 80% chance of a 25 bp rate cut from the Bank of England in December.

JAPANESE YEN: The yen strengthened as Tokyo core CPI figures came in hotter-than-expected, firming the case for a rate hike from the Bank of Japan. Prices rose 2.8% on the year in Tokyo, well above the central bank’s 2% target. Other data out of Japan showed that retail sales and factory output both grew, while the unemployment rate remained steady at 2.6%. Recent comments from several BoJ officials have signaled that the bank is growing worried over a weaker yen’s prospects to raise inflation in the country, suggesting that the bank could act sooner rather than later in an effort to control prices. However, the bank is also monitoring potential wage increases in the country, seeing a rise in wages as a condition to raise rates.

AUSTRALIAN DOLLAR: The Aussie is little changed in a quiet day of economic data in the country as the currency is set to end the week higher following a monthly CPI report showed that annual inflation rose to 3.8% in October,  up from September’s reading of 3.6%. Electricity prices led the charge in inflation as an expiration of government rebates took effect, while prices across most sectors of goods saw modest increases. Trimmed mean CPI, a key gauge of inflation for the Reserve Bank of Australia, rose to 3.3% on the year, well above forecasts of a reading of 3.0%. Still, the RBA may not put too much weight on these readings as the country transitions to a monthly series vs. what has been a reliable quarterly series. Instead, focus will remain on prices in housing and market services to get a better gauge on inflation trends. However, the readings do indicate that the RBA is likely done with its easing cycle as economic conditions remain robust, with consumer activity appearing to reflect little regard to higher interest rates and as inflation has evidently picked up across various sectors of the economy.

INTEREST RATE MARKET FUTURES

Prices are little changed across the board in what is likely to be a quiet day of trading with no new economic data out of the US and an early close. Fed Funds futures are implying an 87% chance of a rate cut at the Fed’s December 9-10 meeting after NY Fed President John Williams comments last Friday added to expectations that there may be enough FOMC members supporting a cut.

Kevin Hassett, director of the NEC for the White House, is appearing to come out as the front-runner for the new Fed Chair position. Treasury Secretary Scott Bessent said on Tuesday there was a very good chance President Trump would announce a new chairman before Christmas. Hassett has been outspoken about the Fed’s need to lower rates and will likely urge policymakers at the FOMC to continue easing policy.

The spread between the two- and 10-year yields is 51.20 bps, while the two-year yield, which reflects short-term interest rate expectations, is little changed at 3.481%.

Interested in more futures markets?  Explore our Market Dashboards here.