Written Commentary
STOCK INDEX FUTURES
Stock index futures are higher across the board as traders digest news of new tariffs and are awaiting key economic data. Consumer price index, producer price index and retail sales reports will be released this week.
In addition, Federal Reserve Chair Jerome Powell will give testimony to Congress on Tuesday and Wednesday.
U.S. President Trump announced plans to impose 25% tariffs on all imports of steel and aluminum into the U.S. and said new reciprocal tariffs would also be announced this week.
The U.S. economy is likely to be stronger than the consensus view, and will perform better than economies elsewhere in the world, which should provide underlying support to stock index futures.
CURRENCY FUTURES
The U.S. dollar index is higher, extending its gains for a third consecutive session as new tariff threats from U.S. President Donald Trump fueled concerns about inflation, which could limit the scope for interest rate cuts from the Federal Reserve.
Late on Sunday, President Trump announced plans for a blanket 25% tariff on all steel and aluminum imports, scheduled to take effect later today, along with additional tariffs to be revealed on Tuesday or Wednesday.
In the longer term view, interest rate differentials are likely to underpin the greenback.
European Central Bank policymaker Boris Vujčić said market predictions of three interest rate cuts are not unreasonable.
There was only limited pressure on the Australian dollar and the Canadian dollar, which are considered to be the “commodity currencies,” after President Donald Trump pledged tariffs on all imports of steel and aluminum on top of his plan for other measures later this week.
INTEREST RATE MARKET FUTURES
Futures are narrowly mixed.
Federal Reserve Board Governor Adriana Kugler on Friday said a stable labor market gives the Federal Reserve time to make decisions, and she wants to make sure inflation progress continues.
Financial futures market are predicting the Federal Open Market Committee will reduce its fed fund rate by 25 basis points at its June 18 policy meeting. However, another interest rate reduction from the FOMC this year is becoming less likely.
The fundamentals and technical aspects have weakened for futures at the front end of the yield curve, and have improved for futures at mid-curve and at the long end of the yield curve.
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