SIFs Mixed Ahead of FOMC Meeting

INTEREST RATE MARKET FUTURES

The Organization for Economic Co-operation and Development (OECD) lowered its G20 growth forecast for 2025 to 3.1% from 3.3% and for 2026 to 2.9% from 3.2%, citing higher trade barriers and policy uncertainties.

There are no Federal Reserve speakers this week since the pre-FOMC ‘blackout’ period just started. The blackout period begins on the second Saturday before a Federal Open Market Committee meeting and ends on the Thursday following the meeting. The next FOMC policy meeting is scheduled for March 19.

The yield on the 10-year U.S. Treasury note held steady at 4.3% on Monday as investors awaited the Federal Reserve’s policy decision this week.

Two weeks ago there was a major change in the fundamentals and outlook for Federal Reserve policies. The probabilities are increasing that the central bank will more aggressively ease credit conditions this year.

Financial futures markets are predicting the FOMC will keep its fed funds rate unchanged at its March and May meetings but will lower its key interest rate two or three more times this year with the first reduction at its June policy meeting.

An accommodative FOMC will underpin prices.

STOCK INDEX FUTURES

Stock index futures are mixed today after sharp recovery gains on Friday. In addition, the March S&P 500 futures on the daily chart broke out above a steep downtrend line.

Retail sales in February increased 0.2% when a gain of 0.7% was expected.

The March Empire State manufacturing index was -20.0 when -0.75 was anticipated.

The 9:00 central time January business inventories report is estimated to show a 0.3% increase,  and the 9:00 March housing market index is forecast to be 42.0.

Several downside blow-off indicators took place last week, indicating lows for the move may be close.

In the longer term, a more accommodative Federal Open Market Committee will support futures.

CURRENCY FUTURES

The U.S. dollar index is lower and is hovering close to five-month lows as interest rate differentials have turned against the greenback.

The Ifo institute has lowered its growth forecast for Germany’s economy to 0.2% on Monday. This revision is attributed to a lackluster consumer sentiment.

However, the institute expects some improvement in 2026, with growth projected to increase to 0.8%. The Ifo, which had previously predicted in December that the economy would see 0.4% growth this year if it could address its structural challenges.

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