Any Surprise From FOMC Could be Dovish

download PDF

STOCK INDEX FUTURES

Major U.S. stock index futures remain near record highs ahead of the Federal Reserve announcement.

Traders have been encouraged by recent comments from the Federal Reserve, which indicated it doesn’t plan to pull back on supportive policies in the near term.

Mortgage applications in the U.S. were up 5.7% in the latest week, rebounding from the 4.0% drop as mortgage rates fell. Applications to refinance a home loan increased 9.3% while those to purchase a home declined 1.6%.

The fundamentals and technical aspects remain positive for U.S. stock index futures.

CURRENCY FUTURES

The U.S. dollar index is higher as demand for safe-haven assets remains strong.

In the weeks ahead it is likely that the flight to quality influence that the greenback has enjoyed recently will dominate over other market influences.

The GfK Consumer Climate Indicator for Germany was unchanged at -0.3 heading into August,  remaining at one-year high but well below market forecasts of 1.0.

Annual house price growth in the U.K. eased to 10.5% in July from a 17-year high of 13.4% in the previous month. Figures compare with market forecasts of 12.1% growth.

The annual inflation rate in Australia increased to 3.8% in Q2 2021 from 1.1% in Q1 and matching the market consensus. This was the highest reading since Q3 2008.

INTEREST RATE MARKET FUTURES

The Federal Open Market Committee concludes its two-day policy meeting today.

The Fed will release its policy statement at 1:00 p.m. central time. Most of the focus is likely to center on Chairman Jerome Powell’s news conference at 1:30 p.m., including any comments he makes about the Fed’s stance toward tapering its $120 billion a month in asset purchases.

The Federal Reserve is expected to keep the fed funds rate at 0-0.25% and bond-buying at the current $120 billion monthly pace. The central bank at the end of last year said it would continue to buy $120 billion in Treasuries and mortgage-backed securities monthly until officials believe they have achieved “substantial further progress” toward their goals of low unemployment and inflation reaching their 2.0% goal.

Any surprises are likely to be on the dovish side.

Risk Warning: Investments in Equities, Contracts for Difference (CFDs) in any instrument, Futures, Options, Derivatives and Foreign Exchange can fluctuate in value. Investors should therefore be aware that they may not realise the initial amount invested and may incur additional liabilities. These investments may be subject to above average financial risk of loss. Investors should consider their financial circumstances, investment experience and if it is appropriate to invest. If necessary, seek independent financial advice.

ADM Investor Services International Limited, registered in England No. 2547805, is authorised and regulated by the Financial Conduct Authority [FRN 148474] and is a member of the London Stock Exchange. Registered office: 3rd Floor, The Minster Building, 21 Mincing Lane, London EC3R 7AG.                  

A subsidiary of Archer Daniels Midland Company.

© 2024 ADM Investor Services International Limited.

Futures and options trading involve significant risk of loss and may not be suitable for everyone.  Therefore, carefully consider whether such trading is suitable for you in light of your financial condition.  The information and comments contained herein is provided by ADMIS and in no way should be construed to be information provided by ADM.  The author of this report did not have a financial interest in any of the contracts discussed in this report at the time the report was prepared.  The information provided is designed to assist in your analysis and evaluation of the futures and options markets.  However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright ADM Investor Services, Inc.