Written Commentary
STOCK INDEX FUTURES
Stock index futures are higher on limited news.
The Chicago Federal Reserve national activity index for April was 0.47, which compares to the expected 0.50.
Markets are looking ahead to a speech by Federal Reserve Chairman Jerome Powell, scheduled for Tuesday, and the Federal Open Market Committee minutes from the May 4 policy meeting on Wednesday for clues on the central bank’s rate-hike path.
CURRENCY FUTURES
The U.S. dollar index has been in an uptrend since May 2021. However, futures have 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 European Central Bank President Lagarde said the central bank is likely to exit negative interest rates by the end of the third quarter.
The Ifo Business Climate indicator for Germany unexpectedly increased to a 3-month high of 93.0 in May from an upwardly revised 91.9 in April, which is above market expectations of 91.4. Both current conditions and expectations improved. The Ifo index is based on a poll of approximately 9,000 companies in manufacturing, services, trade and construction.
Interest rate differential expectations are turning neutral for the currency markets.
INTEREST RATE MARKET FUTURES
The 30-year Treasury bond futures are lower today, after advancing to a three-week high last Wednesday.
Raphael Bostic of the Federal Reserve will speak at 11:00 central time.
Financial futures markets are predicting there is a 92.3% probability that the Federal Open Market Committee will hike its fed funds rate by 50 basis points and a 7.7% probability that the rate will increase by 75 basis points at the June 15 policy meeting.
The interest rate market futures appear to be making a bottom on the charts.
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