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Posted by Tbradley on June 19, 2006, 10:42 am
http://www.oxfordfutures.com/
This week’s US economic schedule is light and includes Tuesday’s May
housing starts report (expected +1.0% following April’s -7.4%) and
Friday’s May durable goods orders report (expected +0.5%). In addition,
there are only two appearances by Fed officials this week. The markets
this week will continue to key on oil prices, the situation with Iran’s
nuclear program, and any further sharp movements in the world’s stock
markets.
The June 28-29 FOMC meeting is coming up next week on Wednesday and
Thursday. The market is discounting a 100% chance of a 25 bp rate hike
at that meeting to 5.25%. The market is then discounting a 70% chance
of a further 25 bp rate hike to 5.50% at the next FOMC meeting on
August 8. The market is discounting a maximum chance at 92% that the
Fed will tighten to 5.50% by November.
Sep 10-year T-note prices this morning are trading -3 ticks due to this
morning's rally in Sep S&Ps, which is reducing flight-to-quality demand
in the Treasury market. T-note prices last Friday extended the
3-session downmove and closed -4 ticks as the market continued to react
negatively to the upward rebound in stock prices (less flight-to-quality
support for T-notes) and to the sharply higher expectations for Fed
tightening that followed 2 weeks of hawkish comments from Fed
officials.
The dollar this morning is trading moderately higher as the dollar
continues to benefit from the Fed's hawkish stance. The dollar/yen is
up +0.38 cent and the euro/dollar is down -0.58 cents. The dollar index
last Friday continued to consolidate near the top of the early-June
rally to a new 1-1/2 month high which was prompted by short-covering
and the sharp upward revision in expectations for Fed tightening.
July crude oil prices this morning are trading -67 cents on the
Financial Times report that Iran is seriously considering the EU-US
proposal and on speculation about lower world economic growth with
rising interest rates. July crude oil prices last week consolidated
near the bottom of the range established by the $8 per barrel sell-off
in oil prices seen in May. The crude oil market continues to see
downward pressure from the plentiful level of crude oil inventories and
the steady increase in gasoline inventories in the past 7 weeks, which
has put gasoline inventories on track with the 5-year average. However,
crude oil prices continue to see support from the ongoing saga with
Iran's nuclear program and by the possibility of damaging hurricanes in
the Gulf of Mexico within the next 2 months.
http://tinyurl.com/owwnz
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Tbradley
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