Flight to Quality Supports The U.S. Dollar
STOCK INDEX FUTURES
S&P 500 and NASDAQ futures advanced to record highs in the overnight trade. However, prices are mixed this morning.
More than 80% of the S&P 500 companies reported better-than-expected earnings so far, according to Refinitiv.
The fundamentals remain bullish on balance for stock index futures.
The U.S. dollar index advanced and is on course for a fourth weekly increase. Much of the strength is linked to bullish interest rate differential expectations and flight to quality flows of funds.
The U.S. dollar strengthened mainly against the euro currency, which made a new 16-month low, as European Central Bank President Lagarde continues to push back against expectations of policy tightening in the euro zone. The ECB chief said it does not make sense to tighten policy, as inflation pressures in the euro zone are expected to fade.
Flight to quality buying is supporting the Japanese yen.
Japan’s government approved a $490 billion package to support the economic recovery. The size of the package was nearly double what analysts were expecting earlier this month.
INTEREST RATE MARKET FUTURES
The 30-year Treasury bond futures are higher as investors piled into the safety of the U.S. dollar and government bonds after new Covid restrictions in Europe clouded prospects for the global economic recovery.
Federal Reserve speakers today are Christopher Waller at 9:45 central time and Richard Clarida at 11:15.
Futures are holding up well despite growing calls for the Federal Reserve to hike its fed funds rate. Money markets are currently expecting an increase in the fed funds rate in June 2022.
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