Written Commentary
STOCK INDEX FUTURES
Stock index futures are higher in advance of Federal Reserve Chair Powell’s testimony before the Senate Banking Committee. Powell reiterated on Tuesday that the U.S. economy is strengthening although the recovery remains far from complete.
Mortgage applications in the U.S. fell 2.5% in the week ended March 19, which is the third consecutive decline.
Durable goods orders in February were up 0.8% when a decline of 1.1% was expected.
The 8:45 central time March PMI composite index is anticipated to be 59.
Stock index futures continue to perform well.
CURRENCY FUTURES
The U.S. dollar advanced to its highest since November despite falling U.S. interest rates, as a shift in risk appetite is favoring safe-haven flows.
The euro currency traded lower as traders remain cautious due to increasing coronavirus infections and restrictions in Europe.
The euro is lower despite news that the euro zone composite PMI jumped to 52.5 in March of 2021 from 48.8 in February, which beat forecasts of 49.1. In addition, Germany’s manufacturing PMI improved to 66.6 in March of 2021 from 60.7 in February, which is above forecasts of 60.8.
The British pound is lower after a report showed the annual inflation rate in the U.K. unexpectedly slowed to 0.4% in February of 2021 from 0.7% in January. This compares to market forecasts of 0.8%.
The Japanese yen is higher on news that Japan’s manufacturing PMI in March improved to a 27-month high, while the service sector grew by the most in three months.
INTEREST RATE MARKET FUTURES
The 30-year Treasury bond market appears to be stabilizing after a sell-off in previous weeks, as Fed Chair Powell continued to play down inflation risks and reiterated the U.S. economic recovery is strengthening but remains far from complete.
In addition to Fed Chair Powell, other Federal Reserve speakers today are Thomas Barkin at 7:50, John Williams at 12:35, Mary Daly at 2:00 and Charles Evans at 6:00.
Yesterday’s two-year note auction saw solid demand. Today the Treasury will auction five-year notes.
It is my belief that the Federal Reserve and other major central banks will follow the lead of the Reserve Bank of Australia and the European Central Bank and eventually implement yield curve control measures.
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