Written Commentary
INTEREST RATE MARKET FUTURES
Futures are lower across the board due to recent hawkish interest rate comments from Federal Reserve officials.
The U.S. Treasury will auction 20-year bonds today.
The minutes from the January 29 Federal Open Market Committee meeting will be released at 1:00 central time.
Philip Jefferson of the Federal Reserve will speak at 4:00 PM.
Financial futures markets are predicting the Federal Open Market Committee will keep its fed funds rate unchanged at its March, May and June policy meetings. However, financial futures markets are predicting the Federal Reserve will reduce its fed funds rate by 25 basis points at its July meeting.
An additional interest rate reduction from the FOMC is unlikely until next year.
The fundamentals and technical aspects have weakened for futures at the front end of the yield curve.
STOCK INDEX FUTURES
Stock index futures are lower.
Housing starts in January were 1.366 million when 1.397 million were expected, and building permits were 1.483 million when 1.470 million were anticipated.
The bullish influence of an improving economic outlook in the U.S. is likely to more than offset the bearish impact of a Federal Reserve that is predicted to be slow to move to additional accommodation.
CURRENCY FUTURES
The U.S. dollar index is higher.
The inflation rate in the U.K. increased to 3.0% in January, coming in above analyst expectations, according to data released by the Office for National Statistics. Economists expected a reading of 2.8% in the twelve months to January. This increase casts doubt on a March Bank of England interest rate reduction.
U.K. house prices increased at their fastest pace in almost two years in the 12 months to December. Average house prices advanced at an annual 4.6%, which is the fastest increase since January 2023 and is up from a 3.9% increase in the 12 months to November, according to the Office for National Statistics.
Bank of Japan policy board member Hajime Takata said the central bank must hike interest rates more if the economy moves in line with BOJ forecasts.
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