Written Commentary
STOCK INDEX FUTURES
Market participants are awaiting Wednesday’s release of the minutes of the Federal Reserve’s September 21 policy meeting.
The September producer price index report will be released on Wednesday, and on Thursday the September consumer price index will be released.
Also, third quarter earnings season kicks off this week.
Federal Reserve speakers have offered no clues as to when the central bank will become less hawkish.
Futures are performing well on limited news today.
CURRENCY FUTURES
The U.S. dollar index is higher due to ongoing hawkish Federal Reserve comments.
However, it appears that there may not be much left on the upside on the belief that the Federal Reserve later this year may tone down its hawkish rhetoric.
The euro currency continued to depreciate, moving toward a 20-year low of $0.95 hit on September 28. The euro remains under pressure due to fears of recession in the euro zone, making it more difficult for the European Central Bank to tighten monetary policy.
Markets expect the ECB to hike rates by large increments at the October and December meetings, but the pace of the rate hike cycle next year could slow.
Investor morale in the euro zone fell for the third consecutive month in October to its lowest level since May 2020.
The British pound continued to weaken to near $1.1, pressured by a stronger U.S. dollar, while the Bank of England announced it would increase its long-dated, temporary gilt market purchase program from a daily maximum limit of £5 billion to £10 billion for the rest of the week.
INTEREST RATE MARKET FUTURES
Futures are mixed.
Charles Evans of the Federal Reserve will speak at 8:00.
Hawkish remarks from Federal Reserve policymakers dashed hopes for any dovish pivot from the U.S. central bank.
According to financial futures markets, there is an 80.0% probability that the Federal Open Market Committee will increase its fed funds rate by 75 basis points at the November 2 policy meeting and a 20.0% probability that the rate will be hiked by 50 basis points.
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