Fed Rate Cut in March?

STOCK INDEX FUTURES

Stock index futures are higher now that traders believe that the Federal Open Market Committee may be lowering its fed funds rate at it’s March policy meeting. It was only a few days ago that the feeling was that the FOMC would not cut rates at its January or March meetings.

The December Institute for Supply Management Manufacturing index was 49.3 when 48.5 was expected.

Prospects of the U.S. economy growing faster than the consensus view should provide underlying support for stock index futures.

CURRENCY FUTURES

The U.S. dollar Index is lower as it appears more likely that the Fed could possibly be a bit more accommodative. It was just yesterday that the greenback was able to trade at the highest level since November 2022.

The fundamentals and technicals remain supportive to the U.S. dollar, and higher prices are likely.

The fundamentals and technical remain bearish for the euro currency and the British pound, and lower prices are likely, especially since the European Central Bank and the Bank of England are likely to be more accommodative in their interest rate policies this year.  he fundamentals and technicals remain bearish for the Japanese yen, and lower prices are likely.

INTEREST RATE MARKET FUTURES

Futures Were higher in the overnight trade on the belief that the Fed may be a bit more accommodative in the first quarter of 2025. However, most of these gains were given back in light of the December Institute for Supply Management manufacturing index, which came in stronger than anticipated.

Earlier this week the December U.S. Treasury bond futures declined to the lowest level since November 2023.

It is likely that the FOMC will keep policies on hold at the January 29 policy meeting. However, there is a 52% probability that the central bank may lower its fed funds rate at the March 19 meeting.

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