Written Commentary
STOCK INDEX FUTURES
Stock index futures were sharply higher yesterday after Federal Reserve Chair Jerome Powell’s appearance before the House Financial Services Committee. His testimony was considered to be somewhat dovish on balance.
Chairman Powell offered an unusually explicit preview of anticipated policy action when he said he would propose a 25 basis point rate increase at the central bank’s meeting in two weeks and played down the possibility of a 50 basis point hike.
Jobless claims in the week ended February 26 were 215,000 when 233,000 were expected.
The 8:45 central time February PMI composite final is anticipated to be 56.0.
The 9:00 January factory orders report is predicted to show a 0.5% increase and the 9:00 February Institute for Supply Management services index is estimated to be 60.9.
Powell will testify before the Senate Banking Committee at 9:00.
CURRENCY FUTURES
Flight to quality longs are being established again in the U.S. dollar, as investors continue a move to safety. The U.S. dollar index hit a 20-month high yesterday.
The jobless rate in the euro zone declined more than forecast in January. The euro zone jobless rate fell to 6.8% in January from 7.0% in December. This reading was below the 7.0% forecast by economists. The number of people classified as unemployed in the euro zone decreased by 214,000 in January compared with the previous month to 11.2 million.
Annual producer inflation in the euro area hit a record high of 30.6% in January of 2022, compared to 26.3% in December and well above market forecasts of 27.0%.
When the geopolitical issues are reduced it will be the interest rate differential expectations influence that will once again dominate to take the British pound higher and the Japanese yen lower.
INTEREST RATE MARKET FUTURES
Federal Reserve speakers today are Thomas Barkin at 11:00 and John Williams at 5:00.
In light of the ongoing geopolitical tensions, there is growing pressure on hawkish central banks to slow their withdrawal of accommodation.
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 Fed will leave its fed funds rate unchanged at 0 to 25 basis points at its March 16 policy meeting. A few weeks ago the probability of a 50 basis point rate hike was over 50.0%.
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