Written Commentary
CURRENCY FUTURES
The U.S. dollar index is lower but will probably firm in advance of the FOMC meeting.
Germany’s consumer price inflation was 2.2% in April 2024, holding steady at its lowest level since May 2021 and was slightly under market forecasts of 2.3%. Also, the EU-harmonized rate moved higher to 2.4%, which is up from March’s near three-year low of 2.3%, and slightly above the market consensus of 2.3%. Core inflation, excluding food and energy, fell to 3.0% in April, which was the lowest level since March 2022.
The economic sentiment indicator in the euro area declined 0.6 points to 95.6 in April 2024, missing market predictions of 96.9.
The Japanese yen declined to its lowest level against the U.S. dollar in 34 years. However, there was a quick recovery in holiday-thinned market conditions in Japan, and there is speculation that the Japanese government intervened to support its currency for the first time since 2022.
STOCK INDEX FUTURES
Stock index futures are higher.
The 9:30 central time April Dallas Federal Reserve manufacturing survey is expected to be -11.3.
The main event this week will be the Wednesday statement from the Federal Open Market Committee meeting and Federal Reserve Chair Powell’s press conference.
The U.S. central bank is anticipated to maintain interest rates at 5.25%-5.50%.
Many analysts believe Fed Chair Powell’s comments at his press conference following the release of the FOMC statement will be hawkish on balance.
INTEREST RATE MARKET FUTURES
Futures are steady to higher.
There are no speakers from the Federal Reserve today.
Financial futures markets are predicting no change in the fed funds rate at the Federal Open Market Committee’s May 1, June 12, and July 31 meetings. However, there is a 62% probability of a rate cut at the September 18 meeting.
I would not be surprised to see the probability of a fed funds rate cut at the September meeting diminishing as we get closer to that meeting.
The fundamentals remain bearish, and lower prices are likely. However, the downtrend is subject to the possibility of a flight to quality flow of funds if geopolitical concerns intensify.
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