Written Commentary
US Dollar Lower on the Day
April 19, 2024
CURRENCY FUTURES
The U.S. dollar index is higher taking out a triple top on the daily chart.
The long term trend for the U.S. dollar is higher as Federal Reserve officials have become even more hawkish in their rhetoric recently.
As a result, interest rate differential expectations have turned more bullish for the greenback.
The British pound continued to decline to below $1.14, which is the lowest level since 1985.
Retail sales in the U.K. fell 1.6% month-over-month in August of 2022, which is the biggest decline this year, and worse than forecasts of a 0.5% drop.
The Bank of England may hike the main rate by 75 basis points at its policy meeting on September 22.
The Japanese yen remains near a 24-year low despite signs that the Bank of Japan is preparing an intervention to prop up the currency. Japanese authorities have been stepping up verbal warnings with the yen down almost 20.0% against the U.S. dollar this year.
Housing starts in Canada declined 3.0% In August from July.
STOCK INDEX FUTURES
Futures are lower after a major U.S. package delivery company yesterday provided weak guidance.
The 9:00 central time September consumer sentiment index is expected to be 59.9.
Prospects of an even more aggressive tightening policy further dented sentiment.
The dominant fundamental is the hawkish Federal Reserve.
INTEREST RATE MARKET FUTURES
According to financial futures markets, there is an 80.0% probability that the Federal Open Market Committee will hike its fed funds rate by 75 basis points and a 20.0% probability that the rate will increase by 100 basis points at the September 21 policy meeting.
The inverted Treasury yield curve is becoming more inverted and 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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