Written Commentary
STOCK INDEX FUTURES
U.S. stock index futures are starting out the month higher in spite of heightened geopolitical tensions.
Stimulus discussions in Washington remain in focus.
The 8:45 central time July manufacturing PMI index is expected to be 51.3.
The 9:00 July Institute for Supply Management index is anticipated to be 53.5 and the 9:00 June construction spending report is estimated to show an increase of 1.3%.
Stock index futures have upside momentum.
CURRENCY FUTURES
The U.S. dollar index fell to a two-year low late last week but is starting out higher in the new month.
Some of the bears on the greenback are speculating that the Federal Reserve may loosen its approach to inflation, which is something analysts believe could happen at its next policy meeting in September.
The euro is lower despite news that the euro zone July manufacturing PMI improved to 51.8 when 51.1 was forecast.
The British pound is lower in spite of news that U.K. output growth is at a 32-month high. In addition, business sentiment recovered to its highest level in 28 months.
The Japanese yen is lower after a report showed Japan’s economy shrank at the same pace as previously estimated in the first quarter, according to a further revision of economic data.
Gross domestic product shrank an annualized 2.2% in the first quarter compared with the final three months of 2019. Economists had forecast a 2.8% contraction.
INTEREST RATE MARKET FUTURES
Futures are steady at the front of the curve and lower at the long end. The front end continues to be supported by the belief that the Federal Reserve will keep interest rates low for a longer period of time. The long end of the curve is under pressure on indications of a global economic recovery.
Federal Reserve speakers today are James Bullard at 11:30 and Charles Evans at 1:00.
The next Federal Open Market Committee meeting is scheduled for September 16. Financial futures markets are predicting there is a 90% probability that the FOMC will maintain its fed funds target rate at zero to 25 basis points.
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