Written Commentary
CURRENCY FUTURES
After trading at the highest level yesterday since August 2, the U.S. dollar index is lower today. There was some pressure when the weak October empire state manufacturing index was released.
Interest rate differentials remain supportive to the U.S. dollar and higher prices are likely.
The ZEW Indicator of Economic Sentiment for Germany for October improved to 13.1, which was 9.5 points above last month’s report.
Industrial production In the euro area increased 1.8% in August over the previous month, which was slightly stronger than forecast, driven by increasing demand for capital and durable consumer goods.
The European Central Bank is expected to cut its deposit rate by 25 basis points on Thursday, following reductions in September and June.
A recent poll showed 51% of economists surveyed expect the Bank of Japan will keep interest rates unchanged through year-end. A previous poll showed 46% of economists anticipated interest rates would remain unchanged. However, 87% of economists expect the BOJ will hike interest rates by 25 basis points by the end of March 2025.
STOCK INDEX FUTURES
Stock index futures are mixed to higher today after recent record highs for S&P 500 and Dow futures.
Futures are trading in an atmosphere of uncertainty about the pace of Federal Reserve interest rate cuts and escalating geopolitical risks in the Middle East.
The October empire state manufacturing index was -11.9 when 2.7 was expected.
Traders are awaiting the next round of big bank earnings.
The technical aspects for stock index futures remain supportive.
INTEREST RATE MARKET FUTURES
Futures were higher in the overnight trade, and there was additional support for futures when the weak October empire state manufacturing index was released.
Minneapolis Federal Reserve Bank president Neel Kashkari said the economy is in the final stages of getting inflation back to the 2.0% target and further modest interest rate cuts appear appropriate.
Federal Reserve speakers today Mary Daly at 10:30, Adriana Kugler at 12:05 and Raphael Bostic at 6:00.
Currently there is an 88% probability that the FOMC will lower its fed funds rate by 25 basis points at its November 7 policy meeting, and there is a 12% chance that the FOMC will keep its key interest rate unchanged at 4.75% – 5.00%.
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