Written Commentary
STOCK INDEX FUTURES
The 8:45 central time May composite flash index is expected to be 55.5.
There are two 9:00 reports. April new home sales are anticipated to be 750,000 and the May Richmond Federal Reserve manufacturing index is estimated to be 14.
The main event today will likely be Federal Reserve Chairman Jerome Powell’s speech at 11:20.
Monetary policy comments from the Fed Chair will probably be hawkish and stock index futures will likely remain under pressure in advance of his speech. However, once his speech has concluded at least a partial recovery is likely.
CURRENCY FUTURES
The U.S. dollar index was in an uptrend since May 2021. However, the greenback has underperformed in the last two weeks. This suggests traders may be sensing that later this year the Federal Reserve may back off of its hawkishness.
The euro currency advanced after the S&P global flash euro zone composite PMI fell to 54.9 in May from 55.8 in April, and below market forecasts of 55.3.
The British pound declined after an index of U.K. private sector growth unexpectedly fell in May.
Pressure on the pound was limited by news that the CBI distributive trades survey’s retail sales balance in the U.K. improved to -1.0 in May from a 13-month low of -35.0 in April, beating market forecasts of -30.0.
Japan’s manufacturing activity expanded at the slowest pace in three months in May.
The au Jibun Bank flash Japan manufacturing purchasing managers’ index slipped to a seasonally adjusted 53.2 in May from a final 53.5 in April.
Interest rate differential expectations are turning neutral for the currency markets.
INTEREST RATE MARKET FUTURES
The 30-year Treasury bond futures are higher in response to lower stock index futures.
The Treasury will auction two-year notes today.
Financial futures markets are predicting there is an 88.0% probability that the Federal Open Market Committee will hike its fed funds rate by 50 basis points and a 12.0% probability that the rate will increase by 75 basis points at the June 15 policy meeting.
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