US Dollar Hits New Highs
The U.S. dollar index advanced to above the March 2023 highs, hitting 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 the safe-haven cash demand ahead of a potential U.S. government shutdown.
In the longer term, interest rate differential expectations remain favorable for the greenback. Financial futures markets are pricing in an almost 40% probability of another Fed hike this year, against smaller chances for another interest rate increase in Europe.
Sentiment among German exporters declined further in September, falling to its lowest level since May 2020, according to a survey by the Ifo economic institute.
In its fifth consecutive month of decline, the institute’s export expectations indicator declined to -11.3 in September, from – 6.5 in August.
Japan’s finance minister said foreign exchange moves are being closely monitored with a great sense of urgency, and appropriate action will be taken against rapid foreign exchange moves.
STOCK INDEX FUTURES
U.S. stock index futures are lower due to the hawkish Federal Reserve, the bearish influence of a potential shutdown of the U.S. government and ongoing labor strike activity.
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.
There are three 9:00 central time reports. The September consumer confidence index is expected to be 105.9. August new home sale are anticipated to be 699,000 and the September Richmond Federal Reserve manufacturing index, which last month was -7.
Stock index futures are oversold at these levels.
INTEREST RATE MARKET FUTURES
The Treasury will auction 2-year notes today.
Michelle Bowman of the Federal Reserve will speak at 12:30.
Financial futures markets are predicting there is an 74% probability that the Federal Open Market Committee will keep its fed funds rate unchanged and a 26% probability of a 25 basis point increase at its November 1 policy meeting.
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