Stock Index Futures Likely to Firm
STOCK INDEX FUTURES
Stock index futures are higher.
There are no major economic reports scheduled for today.
There are no Federal Reserve speakers ahead of the upcoming Federal Open Market Committee, which is in keeping with the Federal Reserve’s self-imposed blackout period.
Without the headwind of hawkish commentary from Federal Reserve officials, stock index futures prices will probably trend higher in the first part of the week.
The U.S. dollar index is lower. Now is a good time to get neutral, at least in the short term, without the support from hawkish Federal Reserve officials.
Longer term, interest rate differential expectations remain favorable for the greenback, especially against the European currencies, since the U.S. economy appears to be holding up relatively well compared to economies in Europe.
The euro zone economy will grow slower than previously predicted this year and in 2023, according to an estimate from the European Commission.
Economists see the European Central Bank hiking interest rates one more time to limit inflation either at its September 14 policy meeting or at the October meeting.
The Japanese yen advanced against the U.S. dollar after Bank of Japan Governor Kazuo Ueda said the central bank could end its negative interest rate policy when its 2.0% inflation target is sustainability achieved.
INTEREST RATE MARKET FUTURES
Futures are steady to higher at the front of the yield curve, and lower at the middle and long end of the curve.
The yield on the 10-year U.S. Treasury note increased to the 4.3%, approaching the 15-year high of 4.34% that was touched on August 22.
The Treasury will auction three-year notes today.
The Federal Open Market Committee is expected to keep its fed funds rate steady this month, while the probability of a quarter-point hike later in the year has been increasing.
Financial futures markets are predicting there is a 93% probability that the Federal Open Market Committee will keep its fed funds rate unchanged at its September 20 policy meeting, and there is a 7% probability of a 25 basis point increase.
However, there is a 45% probability that the FOMC will hike its fed funds rate by 25 basis points at its November 1 policy meeting.
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