US Dollar Highest Since December 2022
The U.S. dollar index advanced to the highest level since December 2022.
The bullish influence of the ongoing hawkish Federal Reserve remains the dominant influence. The U.S. Federal Reserve made it clear that interest rates in the U.S. will stay higher for longer.
In addition, there is a flight to safety influence supporting the greenback in light of reports from Capitol Hill that little if any progress was made on resolving the debt ceiling issue.
In the longer term, interest rate differential expectations remain favorable for the greenback.
Bank lending to households in the euro zone increased by 1.0% year-on-year in August 2023, which is the lowest growth rate since August 2015. Lending growth to companies slowed sharply to 0.6%, which is the lowest level since December 2015.
The Japanese yen is lower despite recent warnings from Japan’s Ministry of Finance that appropriate action will be taken against rapid foreign exchange moves.
Australian consumer inflation increased 5.2% as expected in the 12 months to August. The reading accelerated from a 4.9% advance seen in July, but still remained substantially under annual highs.
STOCK INDEX FUTURES
Recent weakness is due to the hawkish Federal Reserve, the bearish influence of a potential shutdown of the U.S. government and ongoing labor strike activity. However, stock index futures are higher today.
If Congress does not pass a stopgap funding measure before Sunday, a shutdown of some agencies could delay the routine release of economic data on employment, inflation, wages and output.
Durable goods orders in August increased 0.2% when down 0.3% was expected.
Stock index futures are oversold at these levels.
INTEREST RATE MARKET FUTURES
U.S. mortgage rates jumped last week to the highest level since 2000. The contract rate on a 30-year fixed mortgage increased 10 basis points to 7.41% in the week ended September 22, according to Mortgage Bankers Association.
The Treasury will auction 5-year notes today.
Financial futures markets are predicting there is an 80% probability that the Federal Open Market Committee will keep its fed funds rate unchanged and a 20% probability of a 25 basis point increase at its November 1 policy meeting.
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