Written Commentary
STOCK INDEX FUTURES
Futures are firming due to better than expected economic reports.
Durable goods orders in January increased 1.6% when up 0.5% was anticipated.
Personal income in January was unch when a decline of 0.3% was estimated.
The 9:00 central time February consumer sentiment index is predicted to be 61.7 and the 9:00 January pending home sales report is expected to show an increase of 0.8%.
The dominant influences remain geopolitical tensions and the hawkish Federal Reserve.
CURRENCY FUTURES
Flight to quality longs are being liquidated in the U.S. dollar.
The German economy contracted 0.3% on quarter in the last three months of 2021, which is much less than initial estimates of a 0.7% decline.
The economic sentiment indicator in the euro area increased to a 3-month high of 114 in February of 2022, beating market forecasts of 113.1.
Traders are reducing expectations for a 50-basis point interest rate increase from the Bank of England at its March 17 policy meeting after more cautious comments from policy makers.
INTEREST RATE MARKET FUTURES
Flight to quality longs are being liquidated.
Federal Reserve Governor Christopher Waller said Thursday he is willing to support a half-point interest rate increase at the central bank’s next meeting on March 16, if upcoming data suggests inflation is worsening.
In light of increased geopolitical tensions, there is growing pressure on hawkish central banks to slow their withdrawal of accommodation.
Financial futures markets are predicting there is a 79% probability that the Federal Reserve will hike its fed funds rate by 25 basis points at its March 16 meeting. The probability was 83% yesterday.
Some analysts believe that if the rate of growth in the U.S. economy slows, and also globally, it may be difficult for the Federal Reserve and other major central banks to maintain ramped-up hawkish policies.
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