Written Commentary
Flight to Safety Supports the US Dollar
April 26, 2024
STOCK INDEX FUTURES
Stock index futures are lower after St. Louis Federal Reserve Bank President James Bullard and Federal Reserve Bank of Cleveland Loretta Mester stressed the need to raise rates beyond 5.0% to bring inflation down to its 2.0% target.
In addition, there are increasing concerns about a potential recession after data on Wednesday showed retail sales, producer prices and industrial production fell more than expected in December.
Reports today showed housing permits were 1.330 million when 1.380 million were expected, and housing starts were 1.382 million, which compares to the anticipated 1.401 million.
Jobless claims in the week ended January 14 were 190,000 when 215,000 were estimated.
The Philadelphia Federal Reserve manufacturing index was -8.9 when -10.3 was predicted.
CURRENCY FUTURES
Bank of England Governor Andrew Bailey said the “corner has been turned” on U.K. inflation. He said that two months of declines in the U.K.’s headline inflation rate is a signal that the economy may be getting past the worst in a cost-of-living squeeze.
British house prices registered the most widespread declines in 13 years in December. The Royal Institution of Chartered Surveyors house price balance, which measures the difference between the percentage of surveyors seeing increases and declines in house prices, slumped to -42 in December from -26 the previous month.
December’s figure was the lowest since October 2010 and below the -30 that economists had predicted.
Australia employment unexpectedly dipped in December. Figures from the Australian Bureau of Statistics showed net employment fell 14,600 in December, which compares to the estimated increase of 22,500.
INTEREST RATE MARKET FUTURES
The 30-year Treasury bond futures advanced to a four-month high in the overnight trade.
Federal Reserve speakers today are Susan Collins at 8:00 and Lael Brainard at 12:15.
According to financial futures markets currently, there is a 95.0% 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 5.0% probability that the rate will be hiked by 50 basis points.
The long term outlook is for higher futures prices.
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