Written Commentary
STOCK INDEX FUTURES
Stock index futures are higher as investors reassess the outlook for monetary policy.
Recent softer-than-expected headline inflation data, including the first decline in producer prices in over two years, prompted traders to speculate that the Federal Reserve may become less hawkish later this year. However, several Federal Reserve policymakers, including San Francisco Federal Reserve Bank President Mary Daly, said a dovish pivot is unlikely and that the central bank needs further evidence of an inflation peak to change its tightening plans.
Import prices in July declined 1.4% when down 0.9% was expected and export prices fell 3.3% when an increase of 0.1% was anticipated.
The 9:00 central time August consumer sentiment index is estimated to be 52.2.
Despite an ongoing hawkish tone to Federal Reserve officials’ comments, stock index futures are performing well.
CURRENCY FUTURES
The U.S. dollar is recovering from its lowest level in over a month due to hawkish remarks from several Federal Reserve policymakers.
The technical aspects are turning neutral for the U.S. dollar.
The output of industrial firms in the euro zone decelerated in June, but still came in above estimates. Monthly industrial production rose by 0.7%, which is down from the upwardly revised reading of 2.1% in May. Economists had expected an increase of 0.2%.
The U.K. economy contracted in the second quarter. Gross domestic product fell 0.1% in the three months through June. Economists expected a 0.2% decrease in output.
INTEREST RATE MARKET FUTURES
Futures are higher.
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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