Written Commentary
Ag Market View for July 26.24
July 26, 2024
CURRENCY FUTURES
The U.S. dollar index firmed due to this morning’s U.S. economic reports.
It still appears that the Federal Reserve will start cutting interest rates earlier than some of the other major central banks.
Lower prices are likely for the U.S. dollar longer term.
The HCOB euro zone Composite Purchasing Managers’ Index was revised up for December to match November’s 47.6 after a preliminary estimate of 47.0. However, the index remained under the 50 mark, which separates growth from contraction.
The German consumer price inflation report showed an increase to 3.7% year-on-year in December 2023, as expected, rising from the previous month’s over two-year low of 3.2%.
STOCK INDEX FUTURES
Stock index futures are mixed.
The ADP employment report for December showed an increase of 164,000 when up 115,000 was expected.
Jobless claims in the week ended December 30 were 202,000 when 217,500 were predicted.
The 8:45 central time December PMI composite final is forecast to be 51.0.
The fundamentals and technicals remain supportive to stock index futures longer term despite recent talk of a potentially less dovish Federal Reserve in 2024.
INTEREST RATE MARKET FUTURES
The minutes from the December 13 Federal Open Market committee meeting were released yesterday and revealed a consensus view that interest rate cuts are likely to be appropriate this year. However, policymakers stressed the need to remain data dependent and reaffirmed that policy must remain at a restrictive level before the economy shows clearer signs that inflation will decline to the Fed’s target.
Traders continue to believe the Fed will cut interest rates this year but not at the January meeting.
Financial futures markets are predicting there is a 7% probability that the Federal Open Market Committee will reduce its fed funds rate by 25 points at its January 31, 2024 policy meeting and a 93% probability of no change.
However, financial futures markets are currently suggesting the Federal Open Market Committee will reduce its fed funds rate by 25 basis points at its March 20, 2024 policy meeting.
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