Written Commentary
Ag Market View for May 2.24
May 2, 2024
CURRENCY FUTURES
The U.S. dollar index was supported in the overnight trade due to a safe haven flow of funds. However, the greenback is now lower on the day.
The longer term trend for the U.S. dollar is higher since interest rate differentials have turned more favorable. The Federal Reserve is likely to remain restrictive for longer, while other major central banks will probably become accommodative sooner.
German producer prices fell less than expected in March, decreasing by 2.9% on the year when analysts had expected a 3.2% decline.
Retail sales volumes in the U.K. were flat in March 2024, following a revised 0.1% increase in February and missing the market expectation of 0.3% growth.
In the longer term, lower prices are likely for the euro currency and the British pound.
The annual inflation rate in Japan ticked lower to 2.7% in March 2024, matching the market consensus.
Bank of Japan Governor Kazuo Ueda suggested a possible need to raise interest rates again if the yen’s depreciation continues.
STOCK INDEX FUTURES
Stock index futures were sharply lower in the overnight trade in light of increased tensions in the Middle East. However, prices recovered and are now mixed.
The fundamentals in the short term are offsetting.
INTEREST RATE MARKET FUTURES
In a flight to safety move futures were higher in the overnight trade in light of increasing tensions in the Middle East. Futures have retained most of their gains.
Yesterday Raphael Bostic of the Federal Reserve said U.S. inflation is too high, and we still have a ways to go on inflation. He said he does not think the Fed can reduce interest rates until towards the end of the year.
In addition, Neel Kashkari of the Federal Reserve said once inflation is headed back to 2.0% the Fed can then cut interest rates, but they may have to wait until 2025.
Austan Goolsbee of the Federal Reserve will speak at 9:30 central time.
Financial futures markets are predicting no change in the fed funds rate at the Federal Open Market Committee’s May, June and July meetings. However, there is a 69% probability of a rate reduction at the September 18 meeting.
I would not be surprised to see the probability of a fed funds rate cut at the September meeting diminishing as we get closer to that meeting.
The bearish influence of a Federal Reserve that is slow to pivot to accommodation may be offset by the possibility for a flight to quality flow of funds if geopolitical concerns intensify.
Interested in more futures markets? Explore our Market Dashboards here.
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.
ADM Investor Services International Limited, registered in England No. 2547805, is authorised and regulated by the Financial Conduct Authority [FRN 148474] and is a member of the London Stock Exchange. Registered office: 3rd Floor, The Minster Building, 21 Mincing Lane, London EC3R 7AG.
A subsidiary of Archer Daniels Midland Company.
© 2021 ADM Investor Services International Limited.
Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. The information and comments contained herein is provided by ADMIS and in no way should be construed to be information provided by ADM. The author of this report did not have a financial interest in any of the contracts discussed in this report at the time the report was prepared. The information provided is designed to assist in your analysis and evaluation of the futures and options markets. However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright ADM Investor Services, Inc.
