Written Commentary
Ag Market View for Jan 24.25
January 24, 2025
INTEREST RATE MARKET FUTURES
Futures are mostly higher on the belief that the Federal Open Market Committee is on a path toward accommodation policies.
The September 10-year U.S. Treasury note futures advanced to the highest level since March 13.
There is a 96% probability that the Federal Open Market Committee will keep its fed funds rate unchanged at 5.25% to 5.50% at its July 31 policy meeting.
However, financial futures markets are now pricing in three 25 basis point cuts in the fed funds rate later this year.
There is almost a 100% probability that the FOMC will lower its fed funds rate by 25 basis points at its September 18 meeting. In addition, the probability of an additional rate reduction from the FOMC at the November 7 meeting is 64%, and there is a 64% chance of another 25 basis point rate cut at the December 18 meeting.
Higher prices are likely for futures with the 5-year U.S. Treasury notes futures and the 10-year U.S. Treasury note futures likely to lead futures to the upside.
CURRENCY FUTURES
In light of heightened geopolitical tensions in the Mid-East, the U.S. dollar index advanced to its highest level since July 11.
Longer term, the greenback is likely to drift lower due to prospects of a more aggressively accommodative Federal Reserve.
The Confederation of British Industry said its monthly retail sales balance fell to -43 in July from June’s reading of -24, which is the lowest level since April.
The Japanese yen is steady today, but it has shown strong gains since July 10 as traders have been unwinding long U.S. dollar – short Japanese yen carry trades. The Japanese yen is likely to remain firm ahead of the month-end BoJ policy meeting.
STOCK INDEX FUTURES
Stock index futures are higher.
The 9:30 central time July Dallas Federal Reserve manufacturing survey is expected to be -13.5.
Coming easier credit policies from the Federal Reserve will ultimately rescue this market.
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