Written Commentary
STOCK INDEX FUTURES
Stock index futures are higher due to slightly reduced geopolitical risks as traders are hopeful that today’s fourth round of peace talks impacting Eastern Europe may yield results.
Investors are looking ahead to the Federal Reserve’s next monetary policy decision later this week.
The dominant influences remain geopolitical tensions and the hawkish Federal Reserve.
CURRENCY FUTURES
The U.S. dollar is lower but overall is holding up well as traders look ahead to this week’s Federal Open Market Committee meeting.
The euro currency is higher after last week the European Central Bank said it may end asset purchases in the third quarter.
The Bank of England will hold its policy meeting on Thursday, March 17 and is set to deliver at least a 25 basis point rate hike. The BoE raised interest rates twice since December in an effort to tame accelerating inflation.
The Japanese yen declined, extending a 2.2% decline from last week and hitting new 5-year lows, as the Bank of Japan’s dovish policy stance contrasts sharply with other major central banks that are preparing to tighten monetary policies.
The BoJ, which is scheduled to meet on Friday, March 18 has repeatedly stated that it will keep ultra-loose monetary policies to support the economic recovery and achieve its 2.0% inflation target.
BoJ Governor Haruhiko Kuroda also recently ruled out the chance of withdrawing stimulus to deal with the rise in inflation, stressing the need to wait for wage growth to increase.
Lower prices are likely for the Japanese yen.
INTEREST RATE MARKET FUTURES
The Federal Reserve is on track to raise its benchmark interest rate for the first time since 2018 at its Wednesday, March 16 policy meeting.
Financial futures markets are predicting there is a 95.9% probability that the Federal Open Market Committee will hike its fed funds rate by 25 basis points and a 4.1% probability that the rate will remain unchanged at 0 to 25 basis points. The probability for a 50 basis point hike is virtually zero.
Financial futures markets are predicting there are at least five more increases to come in 2022.
Some analysts believe that it may be difficult for the Federal Reserve and other major central banks to maintain ramped-up hawkish policies if the rate of growth in the global economy slows.
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