Written Commentary
STOCK INDEX FUTURES
Stock index futures are lower.
The 8:45 central time December Chicago PMI is expected to be 41.0.
There is a seasonal tendency for the last five days of a calendar year and the first two trading days of the new year for stock index futures to trade higher. If this seasonal works it would mark the seventh one in a row.
CURRENCY FUTURES
The U.S. dollar index continues to underperform the news.
Interest rate differential expectations are long-term bearish for the greenback, and lower prices are likely going into next year.
The Japanese yen is higher today and is being supported by the belief that the Bank of Japan may surprise markets again by tightening monetary policy next month.
INTEREST RATE MARKET FUTURES
There is a triple top in the March fed funds futures at 95.3150, which will probably be taken out on the upside early next year.
The March 30-year Treasury bond futures have given back approximately 50% of the gains that were made from the lows on October 24 to the highs that were made on December 15.
Some analysts are pointing out that the Federal Reserve is shrinking its balance sheet more slowly than the planned pace, which suggests a less hawkish Fed.
According to financial futures markets currently, there is a 70.0% probability that the Federal Open Market Committee will increase its fed funds rate by 25 basis points at the February 1 policy meeting and a 30.0% probability that the rate will be hiked by 50 basis points.
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