Written Commentary
CURRENCY FUTURES
The U.S. dollar is higher in a flight to quality move in light of lower stock index futures and ongoing tensions between the U.S. and China. The greenback continued to be supported by the better than anticipated U.S. jobs data on Friday.
The euro currency is lower despite news that the euro zone economy contracted less than estimated. The euro zone economy’s contraction during the three months through June was 11.8% lower than in the three months through March. The previous estimate was for the GDP to contract by 12.1%.
The euro currency was also pressured by news that German exports for July rose 4.7% when economists were predicting a 5.0% increase.
The European Central Bank will hold its regularly scheduled policy meeting on Thursday. Traders believe the ECB could add more stimulus to its economy, which could weaken the euro.
The British pound is lower due to a less optimistic outlook for trade talks with the European Union. U.K. Prime Minister Boris Johnson has set an October 15 deadline to strike a deal and tensions are likely to intensify in the final weeks ahead of the deadline.
STOCK INDEX FUTURES
U.S. stock index futures are lower due to simmering tensions between the U.S. and China, and concerns over the economy.
The August National Federation of Independent Business optimism index was 100.2 when 98.6 was expected.
The 2:00 central time July consumer credit report is expected to show a $13 billion increase.
INTEREST RATE MARKET FUTURES
Flight to quality buying is supporting futures in light of lower stock index futures.
The U.S. Treasury Department will issue debt with maturities ranging from three months to three years in a series of auctions 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.
Although not the case today, 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.
Risk Warning: Investments in Equities, Contracts for Difference (CFDs) in any instrument, Futures, Options, Derivatives and Foreign Exchange can fluctuate in value. Investors should therefore be aware that they may not realise the initial amount invested and may incur additional liabilities. These investments may be subject to above average financial risk of loss. Investors should consider their financial circumstances, investment experience and if it is appropriate to invest. If necessary, seek independent financial advice.
ADM Investor Services International Limited, registered in England No. 2547805, is authorised and regulated by the Financial Conduct Authority [FRN 148474] and is a member of the London Stock Exchange. Registered office: 3rd Floor, The Minster Building, 21 Mincing Lane, London EC3R 7AG.
A subsidiary of Archer Daniels Midland Company.
© 2021 ADM Investor Services International Limited.
Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. The information and comments contained herein is provided by ADMIS and in no way should be construed to be information provided by ADM. The author of this report did not have a financial interest in any of the contracts discussed in this report at the time the report was prepared. The information provided is designed to assist in your analysis and evaluation of the futures and options markets. However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright ADM Investor Services, Inc.
