Dollar at New Highs
The U.S. dollar index is higher today with much of the strength by default, as additional signs of economic weakness emerge in Europe.
Interest rate differential expectations remain bullish for the greenback long term.
The euro currency is lower and is at its weakest level since 2002, as investors scaled back probabilities of larger European Central Bank interest rate hikes.
The euro continued to weaken below $0.98, as incoming data showed the euro zone downturn deepened in September.
The S&P Global flash euro zone composite PMI fell to 48.2 in September of 2022 from 48.9 in August, pointing to a third consecutive month of contraction.
The British pound fell under $1.11, which is a fresh low since 1985, after the U.K. government announced several tax cuts in an attempt to boost economic growth. The plan includes the cancellation of a planned increase in the corporation tax to 25%, keeping it at 19% and a reversal in the recent 1.25% increase in National Insurance contributions. Investors are worried that public debt levels will soar at a time when the economy is already under downward pressure.
The S&P Global / CIPS Flash U.K. Composite PMI fell to 48.4 in September 2022 from 49.6 in August, which was below expectations of 49.
STOCK INDEX FUTURES
Futures are lower as indications of global economic weakness remain.
The 8:45 central time September PMI composite is expected to be 47.0.
Fed Chair Powell will deliver opening remarks at the Fed Listens event moderated by Vice Chair Lael Brainard and Governor Michelle Bowman at 1:00 central time.
The hawkish Federal Reserve remains the dominant fundamental.
INTEREST RATE MARKET FUTURES
According to financial futures markets, there is a 27.5% probability that the Federal Open Market Committee will hike its fed funds rate by 50 basis points and a 72.5% probability that the rate will increase by 75 basis points at the November 2 policy meeting.
The inverted Treasury yield curve continues to warn of economic risks ahead.
The bearish influence of a hawkish Federal Reserve is overpowering the bullish influence of a weakening economy.
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