Written Commentary
Dollar Index in 6-Day Congestion Pattern
April 23, 2024
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STOCK INDEX FUTURES
Stock index futures are higher despite today’s bearish producer price index report. The April producer price index advanced 0.6% when an increase of 0.3% was anticipated. Jobless claims in the week ended May 8 were 473,000 when 475,000 were expected. A Federal Reserve official on Wednesday said that the scale of the inflation jump in April was surprising, but more data would be necessary for the central bank to begin scaling back its easy-money policies. Stock index futures are ignoring bearish news today suggesting yesterday’s selloff was overdone.CURRENCY FUTURES
The U.S. dollar index advanced yesterday when the larger than estimated increase in the consumer price index was reported. The dollar index firmed to a one-week high as Treasury yields remain elevated after a jump in U.S. consumer prices prompted concerns that the Fed would tighten monetary policy sooner than expected. In spite of the larger than expected increases in consumer price and producer price indexes, Federal Reserve officials have persistently played down inflation risks, saying they are transitory. The greenback is steady today despite the bullish producer price index report. The Japanese yen was supported by news that bank lending in April in Japan increased 4.3% on a year-to-year basis.INTEREST RATE MARKET FUTURES
Futures declined yesterday when the larger than estimated consumer price index was reported. However, prices are higher today in spite of the bearish producer price index report. Fed officials have been pledging continuous support for the economy, while playing down risks of temporary inflationary pressures. Federal Reserve Vice Chair Richard Clarida on Wednesday said weak job growth and strong inflation in April had not changed the central bank’s plan to maintain loose monetary policies. Mr. Clarida said in a speech prepared for delivery to the National Association for Business Economics International Symposium, “These one-time increases in prices are likely to have only transitory effects on underlying inflation, and I expect inflation to return to, or perhaps run somewhat above our 2.0% longer-run goal in 2022 and 2023.” Federal Reserve speakers today are Thomas Barkin at 9:00 and James Bullard at 3:00. Yesterday’s $41 billion auction in 10-year notes was strong and was met with sufficient demand. The Treasury will auction 30-year bonds today. Bearish news recently did not take the 30-year Treasury bond futures to new lows for the move.GOLD AND SILVER FUTURES
Most major central banks will probably keep their accommodation for longer, which remains a bullish longer term influence on the precious metals.Risk Warning: Investments in Equities, Contracts for Difference (CFDs) in any instrument, Futures, Options, Derivatives and Foreign Exchange can fluctuate in value. Investors should therefore be aware that they may not realise the initial amount invested and may incur additional liabilities. These investments may be subject to above average financial risk of loss. Investors should consider their financial circumstances, investment experience and if it is appropriate to invest. If necessary, seek independent financial advice.
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