Written Commentary
STOCK INDEX FUTURES
U.S. stock index futures are higher as investors grew more comfortable that the Federal Reserve and other central banks would maintain their economic support despite the near-term bout of inflation.
Mortgage applications fell 4.2% in the week ending May 21, which is the biggest decline in seven weeks, according to the Mortgage Bankers Association. Applications to refinance a home loan fell 7.2%.
A congestion pattern is forming now that most likely will be followed by an upside breakout.
CURRENCY FUTURES
The U.S. dollar index fell to a four-month low yesterday but is higher today.
In the longer term, pressure on the U.S. dollar is likely as the U.S. budget deficit grows and the Fed’s balance sheet expands. The next support on the daily chart is the early January low of 89.155.
The euro currency is lower but remains near a four-month high.
INTEREST RATE MARKET FUTURES
Futures are firm as Federal Reserve officials maintain a united front on policy expectations. Yesterday Richard Clarida joined Lael Brainard, Raphael Bostic and James Bullard who reiterated this week their view that the recent jump in inflation is temporary and the Fed will remain ultra-accommodative until the economy has further recovered. However, Clarida added that the Federal Reserve may be ready to begin discussing tapering of its asset purchases in upcoming meetings, which is in line with the FOMC minutes that were released earlier this month.
Randal Quarles of the Federal Reserve will speak at 9:00 central time and again at 2:00 this afternoon.
The Treasury will auction five-year notes.
In my minority view, I am seeing indications that the global economy will continue to improve, but growth may not be as strong as many analysts are predicting.
GOLD AND SILVER
Most major central banks will probably keep their accommodation for longer, which remains a bullish influence on the precious metals. I believe follow-through advances are likely for the precious metals. Gold will likely continue to be the leader on the upside.
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