Written Commentary
CURRENCY FUTURES
The September U.S. dollar index advanced above a downtrend line on the daily chart on Tuesday but has now rolled under it possibly signaling a false upside breakout.
The euro currency is higher after European Central Bank President Christine Largarde said recent data suggests a strong rebound that is in line with expectations.
The ECB said in a statement that it would leave its key interest rate unchanged at minus 0.5% and continue to purchase up to 1.35 trillion euros, ($1.59 trillion) of euro zone debt under an emergency bond-buying program that was unveiled in March.
Many analysts expect the ECB will ramp up its monetary stimulus by December, especially after Federal Reserve Chairman Jerome Powell signaled last month that he is willing to allow inflation to run hotter than usual. This major shift in policy suggests the U.S. central bank will keep interest rates low for years, which puts pressure on the ECB to follow suit.
STOCK INDEX FUTURES
U.S. stock index futures are higher after being lower in the overnight trade.
Futures are higher despite Congress remaining deadlocked over a fresh stimulus package, and ongoing tensions between Washington and Beijing.
Jobless claims in the week ended September 5 were 884,000 when 828,000 were expected.
The August producer price index final demand was up 0.3% when an increase of 0.2% was anticipated and the producer price excluding food and energy was up 0.4% when a gain of 0.2% was estimated.
The 9:00 central time July wholesale inventories report is predicted to be down 0.1%.
INTEREST RATE MARKET FUTURES
The U.S. Treasury Department will auction 30-year bonds today.
Interest rate market futures at the short end of the curve are likely to be supported by ideas that major central banks, including the Federal Reserve, will keep short term interest rates low for an extended period.
Futures at the long end of the curve, especially the 30-year Treasury bond futures may be undermined by the inflationary aspects of the Federal Reserve’s “average inflation targeting” policy.
The next Federal Open Market Committee meeting is scheduled for September 16. Financial futures markets are predicting there is a 94% probability that the FOMC will maintain its fed funds target rate at zero to 25 basis points.
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