Written Commentary
STOCK INDEX FUTURES
Stock index futures are higher due to reports of reduced geopolitical risks.
The 9:00 central time March consumer sentiment index is expected to be 61.7.
The dominant influences remain geopolitical tensions and the hawkish Federal Reserve.
CURRENCY FUTURES
The U.S. dollar is holding up well, as traders look ahead to next week’s Federal Open Market Committee meeting.
Yesterday the European Central Bank said it would scale down its bond buying program faster than previously planned, which opens the door to interest rate increases later this year. The ECB reduced its baseline projection for euro zone economic growth in 2022 from 4.2% to 3.7%.
The U.K. economy expanded by 0.8% month-to-month in January of 2022, beating market forecasts of 0.2% expansion.
U.K. consumers are more pessimistic about inflation prospects, which puts additional pressure on the Bank of England to hike interest rates at its policy meeting next week.
The Governor of the Reserve Bank of Australia, Philip Lowe, said domestic inflation is not yet at a point that requires the RBA to increase interest rates. Governor Lowe reaffirmed the RBA’s commitment to keep interest rates on hold until inflation is “sustainably” within its target range of 2.0% to 3.0%.
The Japanese yen fell to its lowest level since January 2017, as interest rate differential expectations remain bearish for Japan’s currency.
INTEREST RATE MARKET FUTURES
Financial futures markets are predicting there is a 97.8% probability that the Federal Open Market Committee will hike its fed funds rate by 25 basis points and a 2.2% probability that the rate will remain unchanged at 0 to 25 basis points at its March 16 policy meeting. The probability for a 50 basis point hike is virtually zero.
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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