Written Commentary
STOCK INDEX FUTURES
Stock index futures are higher despite recent hawkish comments from Federal Reserve officials, warning that interest rates will have to go even higher.
The December consumer price index declined 0.1%, when unchanged was expected. The annualized consumer price index increased 6.5% when an increase of 6.6% was anticipated. This was the slowest annualized pace in 14 months.
Jobless claims in the week ended January 7 were 205,000 when 210,000 were anticipated.
Futures are performing well for the news.
CURRENCY FUTURES
The U.S. dollar index is lower despite recent hawkish comments from Federal Reserve officials and the decline in the December consumer price index.
Interest rate differential expectations are neutral for the U.S. dollar.
Japan’s current account surplus came in at 1.8 trillion yen ($13.7 billion), which is more than three times the median forecast of economists.
Australia’s trade surplus increased to AUD 13.20 billion in November 2022 from October’s AUD 12.74 billion, beating market forecasts of an AUD 10.5 billion surplus. This was the largest trade surplus since June.
INTEREST RATE MARKET FUTURES
Futures are higher due to the 0.1% decline in the consumer price index.
Federal Reserve speakers today are James Bullard at 10:30 central time and Thomas Barkin at 11:40.
The U.S. Treasury will auction 30-year bonds today.
The triple top in the March fed funds futures at 95.3150, was taken out today.
According to financial futures markets currently, there is an 87.0% probability that the Federal Open Market Committee will increase its fed funds rate by 25 basis points at the February 1 policy meeting and a 13.0% probability that the rate will be hiked by 50 basis points.
Longer term, higher prices are likely for futures across the yield curve
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