Written Commentary
STOCK INDEX FUTURES
U.S. stock index futures are lower due to political uncertainties as investors await the outcome of two electoral races in Georgia.
The 9:00 central time December Institute for Supply Management manufacturing index is expected to be 56.5.
Higher prices are likely for stock index futures once the political uncertainties subside.
CURRENCY FUTURES
The U.S. dollar index is lower.
Longer term, the U.S. dollar is likely to trend lower due to expectations for an extended period of low interest rates and concerns over rising U.S. levels of debt.
The euro currency is higher and is not far from last week’s two-and-a-half-year high.
Support for the euro is coming from better than anticipated German employment data.
German jobless claims fell again in December. Jobless claims declined by 37,000 after falling by a revised 40,000 in November. Economists had forecast an increase of 5,000.
The number of registered job vacancies was 581,000 in December, which is down 105,000 on the year.
In addition, the euro was supported by stronger than predicted money supply growth. Euro zone November M3 was up 11.0% on the year when an increase of 10.6% was estimated.
Interest rate differential expectations suggest higher prices for the euro longer term.
The British pound was supported when the U.K. Chancellor announced a new £4.6 billion support package for businesses.
INTEREST RATE MARKET FUTURES
Futures are steady at the front of the curve and are lower at the long end of the curve.
Federal Reserve Bank of Chicago President Charles Evans yesterday said the U.S. economy has a long period of very stimulative monetary policy ahead.
Financial futures markets are predicting there is a 95.2% probability that the Federal Open Market Committee will keep its key fed funds rate unchanged at 0 to 25 basis points at its January 27, 2021 policy meeting.
In the months ahead the yield curve is likely to steepen, which would put pressure on futures at the long end of the curve, especially the 30-year Treasury bond futures, while futures at the short end of the curve are likely to hold steady.
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