INTEREST RATE MARKET FUTURES
Recent weakness in futures at the long end of the yield curve was linked to fears of accelerating U.S. budget deficits.
However, futures are higher across the board today.
Financial futures markets are predicting there is a 69% probability that the Federal Open Market Committee will lower its fed funds rate by 25 basis points at its September 18 meeting.
Financial futures markets are suggesting there will be two 25 basis point rate cuts in 2024, despite many Federal Reserve officials predicting only one fed funds rate cut this year, and some at the Fed predicting no rate reductions.
STOCK INDEX FUTURES
Stock index futures are lower.
Federal Reserve Chair Jerome Powell spoke at 8:30 central time at a European Central Bank forum.
The 9:00 May Job Openings and Labor Turnover Survey (JOLTS) report is expected to show 7.9 million.
History has shown that the month of July has often been an up month for stock indexes.
The longer term fundamentals remain supportive to stock index futures.
CURRENCY FUTURES
Yesterday the U.S. dollar index gapped lower but was able to recover and close higher on the day. The underlying flight to quality influence continues to underpin the greenback.
Madis Muller of the European Central Bank said the central bank can probably cut rates again before the end of the year, and ECB policymaker Pierre Wunsch said there is room for a second rate cut barring any major negative surprises.
The annual inflation rate in the euro area declined to 2.5% in June 2024 after accelerating to 2.6% in May, and matching market estimates.
The unemployment rate in the euro area was at an all-time low of 6.4% in May 2024, which was unchanged from April and matched market predictions.
The Japanese yen depreciated past 161.5 per U.S. dollar, falling to a new 38-year low, as interest rate differentials between Japan and the U.S. remain wide. There is growing speculation that the Bank of Japan could intervene in foreign exchange markets to support the yen.
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