Written Commentary
Ag Market View for July 26.24
July 26, 2024
CURRENCY FUTURES
Now is a good time to be neutral the U.S. dollar, at least in the short term, without the support from hawkish Federal Reserve officials.
Longer term, interest rate differential expectations remain favorable for the greenback, especially against the European currencies, since the U.S. economy appears to be holding up relatively well compared to economies in Europe.
Industrial production in the euro area fell 1.1% month-over-month in July, marking the end of a three-month period of expansion and surpassing the anticipated decline of 0.7%.
The euro currency is hovering near its weakest level in three months, as traders remain cautious ahead of the European Central Bank meeting scheduled for tomorrow. Current market pricing reflects an almost 75% probability that the central bank will hike rates by 25 basis points, which is substantially up from approximately 40% on Monday and 25% last week.
The U.K. economy shrank 0.5% month-over-month in July, which is the largest decline this year and reversing 0.5% growth in June. The median forecast called for a 0.2% fall.
STOCK INDEX FUTURES
Stock index futures are mixed.
The August consumer price index increased 0.6% as expected, and the August consumer price index, excluding food and energy, advanced 0.3% when up 0.2% was anticipated.
Mortgage applications declined 0.8% in the week ending September 8, following a 2.9% drop in the previous week, and hitting a new low since December 1996, according to data from the Mortgage Bankers Association.
The Atlanta Federal Reserve Business Inflation Expectations report for September will be released at 10:00 central time. The August report showed 2.5%.
Stock index futures will likely at least partially recover from the morning pressure without the headwind of hawkish commentary from Federal Reserve officials.
INTEREST RATE MARKET FUTURES
Futures are mostly lower.
There are no Federal Reserve speakers ahead of the upcoming Federal Open Market Committee meeting, which is in keeping with the Federal Reserve’s self-imposed blackout period.
The Treasury will auction 30-year notes today.
The Federal Open Market Committee is expected to keep its fed funds rate steady this month, while the probability of a quarter-point hike later in the year has been increasing.
Financial futures markets are predicting there is a 95% probability that the Federal Open Market Committee will keep its fed funds rate unchanged at its September 20 policy meeting, and there is a 5% probability of a 25 basis point increase.
However, there is a 47% probability that the FOMC will hike its fed funds rate by 25 basis points at its November 1 policy meeting.
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