Written Commentary
CURRENCY FUTURES
The U.S. dollar index is lower and remains near the lowest level since late June due to prospects of a less aggressive tightening from the Federal Reserve.
Interest rate differential expectations are long-term bearish for the greenback and lower prices are likely.
The euro currency is higher despite news that euro zone retail sales dropped sharply and by more than expected in October. The European Commission said retail sales fell by 1.8% during the month, which is down from a gain of 0.8% in September. Economists had predicted the figure would decline by 1.7%.
Britain’s services sector shrank slightly for a second month in November. The S&P Global/CIPS purchasing managers’ index for the services sector held at 48.2 last month, matching October’s 21-month low.
Japan’s service sector activity grew in November at the slowest rate in three months. The final au Jibun Bank Japan Services purchasing managers’ index declined to a seasonally adjusted 50.3 from October’s 53.2, hitting the lowest level since August.
The Bank of Canada will likely hike its key interest rate by 25 or 50 basis points at the conclusion of its policy meeting on December 7.
STOCK INDEX FUTURES
Despite lower prices today the fundamentals and technicals for stock index futures remain supportive.
The 8:45 central time November PMI composite final is expected to be 46.3.
The 9:00 October factory orders report is anticipated to show a 0.7% increase and the 9:00 November Institute for Supply Management services index is predicted to be 53.5.
At least a partial recovery is likely this afternoon.
INTEREST RATE MARKET FUTURES
There are no Federal Reserve speakers today with the blackout period in force from December 3 through December 15.
According to financial futures markets currently, there is a 75.0% probability that the Federal Open Market Committee will increase its fed funds rate by 50 basis points at the December 14 policy meeting and a 25.0% probability that the rate will be hiked by 75 basis points.
The fundamental and technical aspects have turned more supportive for futures.
Futures are likely to recover today from the current lower levels.
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