Written Commentary
CURRENCY FUTURES
The U.S. dollar is higher and hit a daily high when the mostly stronger than expected U.S. economic reports were released. The greenback is still higher on the day but is lower than when the U.S. bullish economic reports were released, which is a sign of weakness.
In recent weeks there has been only a limited flight-to-quality flow of funds into the greenback, which is a sign of longer-term weakness.
The European Central Bank announced that it left key interest rates unchanged at its policy meeting today. The interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain at 4.50%, 4.75% and 4.00%, respectively.
The Confederation of British Industry’s monthly retail sales balance plunged to -36.0 in October 2023, which is a sharp decline from the previous month’s -14 and falling under the market’s expected -16.0. This decline marked the weakest October reading since 2017.
The Japanese yen weakened, keeping traders jittery about possible intervention. The yen hit a fresh one-year low of 150.78 per U.S. dollar and was not far off the 32-year low of 151.94 that it touched in October last year, which led to Japanese monetary authorities intervening in the currency market.
Yesterday the Bank of Canada decided to keep its benchmark interest rate steady at 5.0%, which was widely expected.
STOCK INDEX FUTURES
Stock index futures are lower but are well off the overnight lows.
Third quarter gross domestic product increased 4.9% when up 4.2% was expected. Personal consumption expenditures increased 4.0% when up 4.1% was anticipated.
Durable goods orders in September increased 4.7% when a 1.0% gain was estimated.
Jobless claims in the week ended October 21 were 210,000 when 208,000 were predicted.
The 9:00 September pending homes sales report is forecast to show a decline of 1.0%.
The October Kansas City Federal Reserve manufacturing index will be released at 10:00. Last month the figure was -8.
Stock index futures are performing well considering the economic news. However, gains are likely to be limited by the uncertainties of the situation in the Mideast.
INTEREST RATE MARKET FUTURES
Futures are higher despite the mostly bearish U.S. economic reports.
Federal Reserve Board Governor Christopher Waller will speak at 8:00.
The Treasury will auction seven-year notes today.
Financial futures markets are now predicting there is virtually a 100% probability that the Federal Open Market Committee will keep its fed funds rate unchanged at its November 1 policy meeting.
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