Written Commentary
Ag Market View for May 20.25
May 20, 2025
STOCK INDEX FUTURES
Stock index futures are lower for a third day on Monday as the White House pressed forward with aggressive tariffs on key trading partners.
The gaps down on the daily charts for the S&P 500, NASDAQ and Dow Jones charts have some of the earmarks of being exhaustion gaps and not continuation gaps.
The 2:00 central time February consumer credit report is expected to show a $15 billion increase.
While traders currently are focusing on the negative implications of trade tariffs and geopolitical issues, a more accommodative Federal Open Market Committee will support futures later this year.
CURRENCY FUTURES
The U.S. dollar index is lower today.
The fundamentals for the greenback remain bearish.
Euro zone retail trade increased 0.3% month-over-month in February 2025, following three consecutive months of stagnation, but fell below market expectations for a 0.5% increase.
The Halifax House Price Index in the U.K. Increased by 2.8% year-over-year in March 2025, which is unchanged from a slightly revised figure in February and marking the slowest growth rate since July 2024.
The Japanese yen is a little lower today after recently trading higher due to a flight to safety flow of funds.
In addition, the yen has recently been supported by comments from Bank of Japan Deputy Governor Uchida when he said the central bank will raise interest rates if underlying inflation heightens against a background of continued improvements in economy.
The Australian dollar declined to five-year lows on Monday, due to fears of a recession in Australia. It is likely that the Reserve Bank of Australia will lower its key interest rate by 25 basis points at its policy meeting on May 20. Markets see a 20% chance that the RBA bank could even deliver a 50-basis points rate cut in May.
INTEREST RATE MARKET FUTURES
Flight to safety buying is coming into futures at the front of the yield curve as it appears that the Federal Open Market Committee will more aggressively move to accommodation this year.
The FOMC will likely lower its key interest rate by 25 basis points four times in 2025. Currently there is a 51% probability that the FOMC will implement its first cut at its May 7 policy meeting.
The yield on the U.S. 10-year Treasury note declined to around 3.99%, which is the lowest level since mid-October.
The fundamentals and technicals remain bullish for the interest rate market futures.
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