Written Commentary
STOCK INDEX FUTURES
Stock index futures are higher.
Mortgage applications fell 1.8% in the week ended July 22, which is the fourth consecutive week of declines and pushed the index to the lowest level since February of 2000.
Durable goods orders in June were up 1.9% when a decline of 0.5% was expected.
Wholesale inventories in June increased 1.9%. Last month they were up 2.0%.
The 9:00 central time June pending home sales report is predicted to show a 1.0% decline.
Today is the second day of the two-day Federal Open Market Committee meeting. A statement will be released at 1:00 and Fed Chair Powell will hold a press conference at 1:30.
Futures have recently been supported by the belief that the Federal Open Market Committee is becoming less hawkish.
In addition, the technical aspects are becoming more friendly.
CURRENCY FUTURES
The euro currency is higher today but has come under pressure recently due to recession concerns and the ongoing energy crisis in Europe.
Longer term, lower prices are likely for the euro currency.
Australia’s slightly lower than forecast inflation report reduced prospects for a large Reserve Bank of Australia interest rate hike at next week’s policy meeting.
INTEREST RATE MARKET FUTURES
The International Monetary Fund lowered its outlook for global economic growth again for 2022 and 2023. The IMF said Tuesday it now sees world economic growth slowing to 3.2% this year, compared with a 6.1% expansion in 2021. The IMF has repeatedly reduced its forecast for 2022, from 4.9% in October 2021, 4.4% in January and 3.6% in April.
The Federal Reserve is widely expected to raise the target range for the fed funds rate by 75 basis points to 2.25%-2.50% today, which would be the fourth consecutive rate hike, pushing borrowing costs to the highest level since 2019.
According to financial futures markets, there is a 73.9% probability that the Federal Open Market Committee will hike its fed funds rate by 75 basis points and a 26.1% probability that the rate will increase by 100 basis points at today’s meeting.
Last week the 30-year Treasury bond futures broke out above a two-week symmetrical triangle pattern.
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