Powell Speaks This Morning
STOCK INDEX FUTURES
Stock index futures are higher today after the sharp decline yesterday.
The 9:00 central time August consumer sentiment index is expected to be unchanged from last month at 71.2.
Federal Reserve Chair Powell will speak at 9:05 at the annual Jackson Hole Economic Symposium. Analysts are expecting Powell to reiterate the central bank’s position of keeping interest rates higher for longer to counter inflationary risks, while stressing that policy decisions will be dependent on incoming economic data.
The U.S. dollar index is higher today and reached the highest level since May 31. In recent weeks flight to quality buying has been a supportive factor as well as the recently more hawkish comments from Federal Reserve officials.
In addition, interest rate differential expectations have turned more favorable this week for the greenback, especially against the European currencies, since the U.S. economy appears to be holding up relatively well compared to the euro zone economy.
The U.S. dollar will probably remain firm ahead of Fed Chair Powell’s speech.
Business sentiment in Germany weakened in August for the fourth consecutive month, and by more than predicted. The Ifo business-climate index fell to 85.7 in August from 87.4 in July, missing expectations of 86.6. The reading was the lowest level since October 2022.
Also, Ifo’s indicator gauging current conditions declined to 89.0 from 91.4 in July, which is the lowest level since August 2020.
In addition, its index assessing expectations for the next six months fell to 82.6 in August from 83.6 in the prior month.
The Ifo index is based on a poll of approximately 9,000 companies in manufacturing, services, trade and construction.
The German economy stagnated in the second quarter of 2023 compared to the prior three months, following two consecutive periods of contraction.
The British pound fell under the $1.26 mark, hitting its lowest level since June 13.
INTEREST RATE MARKET FUTURES
Futures will probably remain under pressure in advance of Powell’s speech.
Powell’s speech is anticipated to be in line with his message after July’s Federal Open Market Committee meeting.
Financial futures markets are now predicting there is an 81% probability that the Federal Open Market Committee will keep its fed funds rate unchanged at its September 20 policy meeting, and there is a 19% probability of a 25 basis point increase.
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