Written Commentary
US Dollar Likely to Trend Higher
April 18, 2024
STOCK INDEX FUTURES
Stock index futures are higher as Congressional leaders said Tuesday talks on the debt limit were productive, but they are still far from a deal. Talks are scheduled to continue later this week.
Mortgage applications in the U.S. declined 5.7% in the week ended May 12, according to data from the Mortgage Bankers Association. Applications to refinance a home loan fell 7.7% and those to buy a home fell 4.8%.
April housing starts were 1.401 million when 1.405 million were expected and building permits were 1.416 million, which compares to the anticipated 1.430 million.
Debt ceiling worries are likely to limit gains in futures.
CURRENCY FUTURES
Hawkish comments from Federal Reserve officials are supporting the U.S. dollar.
The euro area’s annualized consumer price inflation was confirmed at 7.0% in April 2023, which is slightly higher than the previous month’s 13-month low of 6.9%. The rate remains significantly above the European Central Bank’s target of 2.0%.
Speaking at the Global Annual Conference of the British Chambers of Commerce today, Bank of England Governor Andrew Bailey said inflation was likely to fall sharply from its current 10.1% level “over the coming months,” as lower energy costs helped to bring the headline rate of price increases down. He also said he was “unwavering” in his commitment to the U.K.’s 2.0% inflation target, and if there is more evidence of persistent pressures, then further tightening In monetary policy would be required.
Japan’s economy emerged from recession and grew faster than expected in the first quarter. The world’s third-largest economy grew an annualized 1.6% in January-March, exceeding market forecasts for a 0.7% gain and marking the first increase in three quarters.
INTEREST RATE MARKET FUTURES
Futures are mixed to higher despite hawkish comments from Federal Reserve officials.
Federal Reserve Bank of Atlanta President Raphael Bostic voiced optimism that the Federal Reserve could achieve a soft landing for the U.S. economy.
The Treasury will auction 20-year bonds today.
The Federal Open Market Committee will probably keep its fed funds rate unchanged at its June 14 policy meeting.
The technicals and fundamentals remain supportive to futures.
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