Written Commentary
STOCK INDEX FUTURES
New record highs were registered in S&P 500 and Dow futures in the overnight trade. This was in response to the statement yesterday from the Federal Open Market Committee when it pledged to maintain its easy-money policies.
Selling developed today as traders focused on rising longer-term yields.
Jobless claims in the week ended March 13 were 770,000 when 700,000 were expected.
The 9:00 central time February leading Indicators index is anticipated to be up 0.3%.
Stock index futures are performing well despite recent weak economic data.
CURRENCY FUTURES
The U.S. dollar index declined yesterday after the FOMC announcement. However, the greenback is higher today as traders focus on rising longer-term U.S. interest rates.
The euro currency is lower after the European Union’s statistics agency said exports fell by 2.8% in January compared with December, while imports decreased by 1.3%.
The British pound is lower after the Bank of England at its policy meeting today indicated it does not intend to tighten monetary policy at least until there is clear evidence that significant progress is being made in eliminating extra capacity and achieving the 2.0% inflation target.
The BOE’s Monetary Policy Committee kept its benchmark interest rate at an all-time low of 0.1%, which was in line with forecasts. The central bank failed to signal any increase in its bond-buying in the coming months.
The Bank of Japan will hold its policy meeting tomorrow. The central bank is likely to clarify how much it will allow bond yields to deviate from its 0% target.
INTEREST RATE MARKET FUTURES
My analysis of yesterday’s FOMC meeting statement suggests the Fed was dovish on balance at the short end of the curve and a bit hawkish at the long end of the curve.
Futures at the short end of the curve were supported when Federal Reserve Chairman Jerome Powell repeated pledges to hold interest rates steady in an effort to keep the economic recovery on track even if inflation breached its 2.0% target this year.
Futures at the long end of the curve came under pressure when the Fed indicated it was not ready to implement yield curve control measures.
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