Written Commentary
STOCK INDEX FUTURES
Stock index futures kicked off the second quarter on a firm note.
The 8:45 central time March PMI manufacturing report is expected to be 52.5.
The 9:00 March Institute for Supply Management manufacturing index is anticipated to be 48.3, and the 9:00 February construction spending report is predicted to show a 0.5% increase.
The fundamentals are mostly bullish, while the technicals remain supportive to stock index futures.
CURRENCY FUTURES
The U.S. dollar index is higher.
The Governor of the Bank of Greece, and member of the European Central Bank Governing Council, Yannis Stournaras, said “If inflation develops in line with our March forecast, and if this trend continues until the end of the year, I believe that this year we will have reductions in key interest rates from the ECB.” “Personally, I think the reduction of interest rates by four times this year, by 25 basis points each time, is possible.” However, he said his view was not shared by all policymakers at the ECB.
Japan’s Finance Minister Shunichi Suzuki said on Monday there were some speculative moves in the foreign exchange markets that did not reflect economic fundamentals, repeating his warnings against excessive yen declines. He said, “We will watch currency market developments with a strong sense of urgency, and will respond appropriately against excessive moves without ruling out any options.
INTEREST RATE MARKET FUTURES
Federal Reserve Chair Jerome Powell reiterated on Friday that the central bank was in no hurry to cut interest rates, and that the latest PCE inflation data was in the line with what the Fed wants to see.
Lisa Cook of the Federal Reserve will speak at 5:50 PM.
Financial futures markets are predicting there is a 7.0% probability that the Federal Open Market Committee will lower its fed funds rate by 25 basis points at the May 1 policy meeting, and there is a 93.0% chance that the Fed will keep rates unchanged.
The consensus view currently is that the FOMC will lower its fed funds rate three times this year starting in June.
My view is that only two cuts are likely this year.
The fundamentals and technicals are bearish on balance.
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