Written Commentary
INTEREST RATE MARKET FUTURES
Futures are relatively flat across the curve, with yields higher at the long end. Friday’s resilient labor report reinforces the Fed’s wait-and-see approach to monetary policy while the larger inflation picture plays out. Wednesday’s CPI inflation report for May will be a key indicator to see how tariffs have affected inflation in the country and for signals as to the Fed’s path on monetary policy. Headline CPI inflation is expected to increase 2.5% in May, a step above April’s 2.3% reading.
Revisions to March and April’s labor data showed employers added a combined 95,000 fewer jobs than previously estimated. Additionally, the JOLTS report showed that layoffs ticked higher in April. A monthly survey from Challenger, Gray & Christmas this week reported 94,000 US job cuts in May, up from 64,000 in the same month last year. So far in 2025, US firms have laid off 80% more workers than in the same five months last year. Markets are expecting 50 bps of easing this year from the Fed, with the first rate cut coming at the September meeting.
Three-year Treasurys will be auctioned Tuesday and 10-year Treasurys on Wednesday. Thursday will see a highly anticipated 30-year Treasury auction; the auctions will provide an up-to-date demand picture for US debt securities, which has faltered in recent weeks over growing concerns over the US fiscal debt picture.
The 10-year Treasury yield is 4.50%, and the 30-year yield is hovering around 4.97%. The spread between the two- and 10-year yields rose to 47 bps from 44 bps Friday, steepening the yield curve ahead of the key auctions and inflation data.
CURRENCY FUTURES
The USD index edged lower as investors await key inflation readings later in the week and news regarding trade talks between the US and China, who are meeting in London today. The dollar had strengthened on Friday after the May jobs report showed slightly stronger-than-expected employment growth, although cracks in the labor market are starting to appear.
Euro futures edged higher in the overnight session as the dollar slipped. The European Central Bank cut its benchmark interest rate by 25 bps to 2.00% Thursday, a response to slowing inflation and threats from President Trump’s tariffs on the region’s growth. ECB President Christine Lagarde said in a press conference following the decision that the central bank is likely “getting to the end of the monetary-policy cycle.” Markets are now pricing in only one more rate cut by the end of the year. Several ECB members are set to speak this week with potential insights into the bank’s future monetary policy path.
British pound futures are higher as investors look ahead to unemployment and earnings data out of the UK on Tuesday. Average earnings, unemployment claims, and the unemployment rate for April are all due at 1:00 a.m. CT Tuesday morning. Average earnings are expected to rise 5.3%, unemployment claims are expected to rise by 9,500, and the unemployment rate is expected to be 4.6%. The Bank of England’s governor, Andrew Bailey, said Tuesday that the bank will continue to cut rates, but the extent to which and the timing remain in question. Markets are pricing in two interest rate cuts this year, with the base rate expected to land at 3.75%.
Yen futures are higher following a better-than-expected revised GDP reading, which saw GDP unchanged at 0.0% growth vs a previous reading of a -0.2% contraction. Despite the upward revision, the result still reflects a sharp deceleration from the 0.6% growth recorded in the prior quarter. Separately, Japan’s current account surplus narrowed in April and fell short of market expectations, adding a mixed note to the economic outlook. Bank of Japan Governor Kazuo Ueda said that interest rate hikes will be on hold until economic and inflation forecasts are met.
Australian dollar futures are higher on growing optimism over US-China trade talks. GDP grew 0.2% quarter-over-quarter in Q1 2025, down from 0.6% growth last quarter and below the forecasted 0.4%. GDP in the country grew at its slowest pace in three quarters, while annual GDP rose 1.3%, short of the 1.5% estimate. The lower-than-expected reading supports the Reserve Bank of Australia’s latest meeting minutes, which suggested the bank will be ready to deliver more rate cuts to counter weak economic growth.
STOCK INDEX FUTURES
Stock index futures held steady in overnight trade. US and Chinese officials will meet in London on Monday for a second round of trade talks between the world’s two largest economies. On the economic front, all eyes are on upcoming inflation data. The Consumer Price Index (CPI) for May is set to be released on Wednesday, followed by the Producer Price Index (PPI) on Thursday. Also on Friday, the University of Michigan will publish its latest consumer sentiment index, offering further insight into public confidence in the economy. In the corporate world, Apple is in the spotlight as it kicks off its 2025 Worldwide Developers Conference on Monday, drawing significant attention from tech analysts and investors alike.
Stock valuations are still relatively high by historical standards; the S&P 500 was trading at 22 times its expected earnings over the next 12 months as of June 6, versus a 10-year average of 18.7 times. The high price-to-earnings ratio is at odds with the current macro environment, which has seen central banks and private companies across the globe cut their growth forecasts due to the still-unfolding consequences of uncertain trade policies.
Interested in more futures markets? Explore our Market Dashboards here.
Risk Warning: Investments in Equities, Contracts for Difference (CFDs) in any instrument, Futures, Options, Derivatives and Foreign Exchange can fluctuate in value. Investors should therefore be aware that they may not realise the initial amount invested and may incur additional liabilities. These investments may be subject to above average financial risk of loss. Investors should consider their financial circumstances, investment experience and if it is appropriate to invest. If necessary, seek independent financial advice.
ADM Investor Services International Limited, registered in England No. 2547805, is authorised and regulated by the Financial Conduct Authority [FRN 148474] and is a member of the London Stock Exchange. Registered office: 3rd Floor, The Minster Building, 21 Mincing Lane, London EC3R 7AG.
A subsidiary of Archer Daniels Midland Company.
© 2021 ADM Investor Services International Limited.
Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. The information and comments contained herein is provided by ADMIS and in no way should be construed to be information provided by ADM. The author of this report did not have a financial interest in any of the contracts discussed in this report at the time the report was prepared. The information provided is designed to assist in your analysis and evaluation of the futures and options markets. However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright ADM Investor Services, Inc.
