USD Index Futures Extend Losses on ECB Decision

September 8, 2016 12:03PM CDT

U.S. Dollar Index futures have extended losses after the European Central Bank (ECB) surprised commodities futures markets on Thursday with its decision on bond-buying.

The ECB decided against extending the deadline for its trillion-euro bond-buying program, amid economists’ expectations that the central bank would continue the program beyond its current deadline of March 2017. At the same meeting, the ECB held its key interest rates unchanged at 0.25 percent, as expected.

The December contract slipped .21 percent to 94.690 on Thursday after an earlier drop to 94.385. A somewhat uneventful week and lingering holiday vacations are contributing to low volume in commodities futures markets in the U.S., and weighing on prices in many sectors.

U.S. Dollar Index futures prices also continue to fall after failing to move higher in response to the weaker-than-expected August jobs report last Friday. Employers added 151,000 jobs last month, much weaker than the reading expected by most economists, according to the U.S. Department of Labor. The unemployment rate held at 4.9 percent.

All of these facts have led commodities futures markets participants to believe that the odds of a rate hike this month are fading. The probability that the Federal Open Market Committee will increase the fed funds rate at the December 13-14 policy meeting is 53 percent, and the possibility for a rate hike in June is 66 percent.

Commodities futures markets had few reports to digest on Thursday. In the U.S. Weekly Jobless Claims unexpectedly fell to 259,000, a decrease of 4,000 from the previous week's unrevised level of 263,000, according to the Labor Department. Economists had forecast initial jobless claims to inch up to 264,000.

Within the energy sector of commodities futures markets, Natural Gas Inventories for the week ended September 2 compared to forecasts of 40 billion cubic feet, according to the Energy Information Administration (EIA).

Crude Oil Inventories were also revealed on Thursday this week as opposed to the regularly-scheduled release on Wednesday, due to the U.S. Labor Day holiday on Monday. Crude Inventories decreased by 14.5 million barrels versus the expected addition of 631,000 for the week ended September 2, according to the EIA.

The Consumer Credit report for July is released this afternoon. On Friday, the most relevant report for commodities futures markets is July Wholesale Inventories.

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