New Round of Central Bank Easing Coming

June 18, 2019


U.S. stock index futures advanced in recent weeks due to the belief that new global easing cycle is about to begin in light of a weakening global economic outlook.

Todays gains are due to comments from European Central Bank President Mario Draghi when he indicated the possibility that the central bank will embark on a new round of interest rate cuts or asset purchases.

Mr. Draghi, speaking at the ECB's annual conference in Portugal, said the bank still has room to buy more bonds and additional interest rate cuts remain a possibility.

U.S. housing starts in May were 1.269 million, which compares to expectations of 1.239 million and residential building permits were 1.294 million when 1.290 million were anticipated.

My view remains that the global reflation scenario is on track and easier credit conditions from most of the worlds central banks, including the Federal Reserve, are coming and will be the dominant fundamental that supports stock index futures in the long term.


The euro currency declined as a result of Mario Draghis dovish policy comments. Draghi said the euro region will need additional stimulus if the economic outlook doesnt improve.

Financial futures markets are now bringing forward pricing for a 10 basis point rate cut by September.

The yield on 10 year German bunds fell to a record low of minus 0.305%.

Germany's economic confidence substantially weakened to a seven-month low in June.

The Bank of Japan and the Bank of England will hold policy meetings on Thursday. No changes are expected from either meeting.

The Canadian dollar is lower after Canada's factory sector unexpectedly declined in April. Manufacturing sales fell 0.6% in April from the previous month. The expectation was for a 0.6% increase.


The 30 year Treasury bond futures advanced to new highs for the move and are at the highest level since October 2017.

Traders continue to believe the Federal Reserve will be forced to cut interest rates to boost economic growth.

The probability of a fed funds rate reduction from the Federal Open Market Committee at the conclusion of the two-day policy meeting on Wednesday is 29%

The central bank is expected to signal the possibility of an interest rate reduction later this year.

Financial futures markets are predicting there is an 89% probability that the Federal Open Market Committee will lower its fed funds rate by 25 basis points or more at its July 31 policy meeting. Yesterday the probability was 85%. Another rate cut is likely later this year.

Higher prices are likely for the interest rate futures market in light of a coming new round of central bank easing of credit.


September 19S&P 500

Support 2887.00 Resistance 2921.00

September 19 U.S. Dollar Index

Support 96.790 Resistance 97.310

September 19Euro Currency

Support 1.12550 Resistance 1.13280

September 19Japanese Yen

Support .92660 Resistance .93110

September 19Canadian Dollar

Support .74510 Resistance .74620

September 19Australian Dollar

Support .6842 Resistance .6882

September 19 Thirty Year Treasury Bonds

Support 154^10 Resistance 156^0

August 19Gold

Support 1339.0 Resistance 1362.0

July 19Copper

Support 2.6400 Resistance 2.6900

July 19 Crude Oil

Support 51.33 Resistance 53.03

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