Dollar Likely to Give Back Gains

STOCK INDEX FUTURES

Stock index futures traded sharply higher yesterday after the inflation expectations portion of the December consumer confidence report fell to the lowest level in a year, reflecting fewer worries about inflation.

Prices are lower today as traders remain concerned that a more hawkish Fed could tip the economy into recession.

Jobless claims in the week ended December 17 were 216,000 when 225,000 were expected.

The third quarter gross domestic product increased 3.2% when up 2.9% was anticipated.

The 9:00 central time November leading indicators index is predicted to be down 0.5%.

The December Kansas City Federal Reserve manufacturing index will be released at 10:00. In November the index was  -6.0.

Despite recent pressure on futures, the fundamentals and technicals for stock index futures remain supportive.

CURRENCY FUTURES

The U.S. dollar index continues to underperform the news.

Interest rate differential expectations are long-term bearish for the greenback, and lower prices are likely.

The U.K. economy contracted 0.3% on the quarter in the three months to September of 2022, which is slightly more than a preliminary estimate of a 0.2% drop.

The Bank of Japan may surprise markets again by tightening monetary policy as soon as next month.

INTEREST RATE MARKET FUTURES

Futures are holding up well despite the larger than estimated increase in the gross domestic product.

According to financial futures markets currently, there is a 72.0% probability that the Federal Open Market Committee will increase its fed funds rate by 25 basis points at the February 1  policy meeting and a 28.0% probability that the rate will be hiked by 50 basis points.

The fundamental and technical aspects are supportive for futures.

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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.

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