Written Commentary
STOCK INDEX FUTURES
Stock index futures are mixed to higher.
The gross domestic product in the fourth quarter increased at an annualized rate of 2.3% when up 2.6% was expected, and personal consumption expenditures at an annualized rate was up 4.3% when a gain of 3.1% was anticipated.
Jobless claims in the week ending January 25 were 207,000 when 224,000 were estimated.
The Federal Open Market Committee concluded its two-day policy meeting yesterday. The Federal Reserve kept its key interest rate unchanged at 4.25% to 4.50% as expected.
The downside gap on the March S&P 500 daily chart at 6105.25 – 6122.00 that took place on January 27 is now a resistance area but likely will be filled over the next few days.
In the longer term outlook, the bullish influence of prospects of a strengthening U.S. economy will more than offset the bearish influence of the Federal Reserve’s reluctance to ease credit conditions.
CURRENCY FUTURES
The U.S. dollar index is lower after being higher in the overnight trade and testing a major downtrend line.
On the daily March U.S. dollar index chart, prices on Friday declined below a double bottom level at 107.545. There was only limited follow-through to the downside on Monday. However, prices advanced earlier this week and are above the double bottom breakout level, which suggests Friday’s chart sell signal could be a false signal.
The European Central Bank reduced its key interest rate by 25 basis points at its monetary policy meeting today as expected. The ECB cut its key deposit rate four times last year.
Germany’s gross domestic product fell by 0.2% in the fourth quarter in 2024, which compares with the previous three-month period. Analysts had predicted a 0.1% quarter-on-quarter decrease in adjusted terms.
The deputy governor of the Bank of Japan, Ryozo Himino, said the central bank will raise interest rates if the economy and prices move in line with forecasts.
INTEREST RATE MARKET FUTURES
Futures are slightly lower at the front end of the yield curve and are higher at mid-curve and at the long end of the yield curve.
Yesterday the Federal Open Market Committee acknowledged that inflation remains “somewhat elevated.” The central bank also highlighted that both growth and the labor market remain in a healthy position, while removing its previous reference to making “progress” on inflation. However, Fed Chair Jerome Powell in his press conference made comments that tended to offset the impact of the statement when he said progress was still being made, implying there was still plenty of scope to cut interest rates.
Financial futures market are predicting the FOMC will reduce its fed fund rate by 25 basis points at its June policy meeting.
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