Written Commentary
Ag Market View for July 26.24
July 26, 2024
STOCK INDEX FUTURES
Recent strength in stock index futures was primarily due to prospects of a less hawkish Federal Reserve, although some pressure developed yesterday due to the larger than expected increase in the September consumer price index.
Better than anticipated earnings in the banking sector supported futures today.
September import prices increased 0.1% when up 0.5% was expected.
The 9:00 central time October consumer sentiment index is predicted to be 67.5.
The fundamental and technical factors are becoming more supportive.
CURRENCY FUTURES
Yesterday’s bullish increase in the consumer price index and buy stop activity took the U.S. dollar higher, after a two-week downtrend.
However, the greenback is lower today.
So where is the flight to quality flow of funds into the U.S. dollar that is evident in other safe-haven vehicles, such as the interest rate market futures, gold and silver?
In the last few days there appears to be only a limited flight-to-quality flow of funds into the greenback.
Euro zone industrial production increased more than expected in August. The European Union’s statistics office said industrial production in the 20 countries sharing the euro currency increased 0.6% month-on-month in August when economists expected a 0.1% monthly increase.
INTEREST RATE MARKET FUTURES
The escalation of the war in the Middle East prompted renewed flight to quality flows, offsetting the recent bearish influence of higher than expected producer and consumer price index data.
Patrick Harker of the Federal Reserve will speak at 8:00.
Recent dovish comments from Federal Reserve officials reduced expectations of another interest rate hike this year.
This week’s larger than estimated increase in producer price and consumer price indexes only had a temporary impact on Fed policy expectations.
Financial futures markets are now predicting there is a 93% probability that the Federal Open Market Committee will keep its fed funds rate unchanged and only a 7% probability of a 25 basis point increase at its November 1 policy meeting.
The Federal Reserve’s target range for the fed funds rate currently is 5.25% to 5.50%.
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