Written Commentary
STOCK INDEX FUTURES
The August producer price index report showed a 0.1% decline as expected, and the producer price index excluding food and energy, increased 0.2% when a gain of 0.3% was anticipated.
Mortgage applications in the U.S. fell 1.2% in the week ended September 9, which is the fifth consecutive decline.
The September Atlanta Federal Reserve business inflation expectations report will be released at 9:00 central time. The figure was 3.5% in August.
The dominant fundamental is the hawkish Federal Reserve.
CURRENCY FUTURES
The U.S. dollar index is giving back some of the gains it made following Tuesday’s consumer price index report.
The long term trend for the U.S. dollar is higher as Federal Reserve officials have become even more hawkish in their rhetoric recently.
In addition, interest rate differential expectations have turned more bullish for the greenback.
Industrial production in the euro area fell 2.3% month-over-month in July of 2022, after an upwardly revised 1.1% increase in June. This was the biggest drop in industrial activity since August 2021 and compares with market expectations of a 1.0% decline.
The annual inflation rate in the U.K. unexpectedly edged lower to 9.9% in August of 2022 from 10.1% in July, which was the highest level since 1982, and below market forecasts of 10.2%. This is the first time in 11 months that the rate of inflation eased.
The Japanese yen firmed from near a 24-year low on signs that the Bank of Japan is preparing an intervention to prop up the currency. Japanese authorities have been stepping up verbal warnings with the yen down almost 20.0% against the U.S. dollar this year.
INTEREST RATE MARKET FUTURES
The release of the August producer price index report had little market impact.
According to financial futures markets, there is an 68.0% probability that the Federal Open Market Committee will hike its fed funds rate by 75 basis points and a 32.0% probability that the rate will increase by 100 basis points at the September 21 policy meeting.
The inverted Treasury yield curve continues to flash warnings of economic risks ahead.
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