Written Commentary
STOCK INDEX FUTURES
Stock index futures are higher as investors reassess the outlook for monetary policy.
The July producer price index declined 0.5%, which compares to the expected 0.2% increase.
Jobless claims in the week ended August 6 were 262,000 when 264,000 were anticipated.
Despite an ongoing hawkish tone to Federal Reserve officials’ comments, stock index futures are performing well.
CURRENCY FUTURES
The U.S. dollar continues to come under pressure after yesterday’s unchanged July month-to-month consumer price index report.
There was additional selling today when the decline in the producer price index was reported.
The technical aspects are turning neutral for the U.S. dollar.
The Swiss franc advanced to a four-month high due to a hawkish Swiss National Bank. There is speculation that policymakers are considering a 50 to 75 basis point rate hike at the central bank’s next policy meeting.
INTEREST RATE MARKET FUTURES
Futures continued to advance in the overnight trade after yesterday’s bullish consumer price index report.
There was support today when the drop in the producer price index was released.
Federal Reserve officials responded to softening inflation data by saying it does not change the central bank’s path toward higher interest rates this year and next.
Minneapolis Federal Reserve President Neel Kashkari on Wednesday said he wants the Fed’s benchmark interest rate at 3.9% by the end of this year and at 4.4% by the end of 2023.
Charles Evans said inflation remains “unacceptably high.” He said, “we will be increasing rates the rest of this year and into next year to make sure inflation gets back to our 2.0% inflation objective.”
The Treasury will auction 30-year bonds today.
The inverted Treasury yield curve continues to flash warnings of economic risks.
According to financial futures markets, there is a 65.5% probability that the Federal Open Market Committee will hike its fed funds rate by 50 basis points and a 34.5% probability that the rate will increase by 75 basis points at the September 21 policy meeting.
Higher prices are likely across the board for futures despite the hawkish Federal Reserve.
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