Will U.S. Consumer Confidence Data Call A Halt to Dollar Rout?

After being crushed by moderating expectations for Fed rate hikes and unease over North Korea’s latest missile test, a strong consumer confidence number could help put a floor under the greenback.

August’s reading of US consumer confidence numbers could help call a halt to the dollar’s fall Tuesday, if optimism among consumers has continued to defy the collective wisdom of economists during the recent month.

The consensus among economist is for the Conference Board index to show a small fall from its current 121.1 level, down to 120.3, when the number is released at 15:00 London time.

However, it is noteworthy that consensus has projected a fall in the index for each of the two prior releases, only for the barometer of household optimism to have defied expectations by posting an improvement.

“The market is looking for the index to post a modest dip to 120.4 from 121.1. However, this measure is sitting near a 17-year high so some giveback should not be viewed as overly bearish, says James Rossiter, senior global strategist at TD Securities in London.

Continued gains in the index could help to place a floor under the US dollar which has been in free fall during recent days thanks to moderating expectations around the likely pace of Fed rate hikes as well as renewed belligerence from North Korea.

Any contraction in August could reflect unease over political dysfunction in Washington which has the potential to hamper the Trump administration’s legislative and economic agenda.

The pound to US dollar exchange rate was trading 0.14% higher at 1.2948 mid-way through the noon session in London Tuesday.

The dollar, on the other hand, ceded ground to all of its major counterparts. The EUR/USD rate was up 0.42% to 1.2028 while the USD/JPY rate dropped 0.61% to 108.7 and the USD/CHF rate slid 1% to .9458.

“The USD is under broad pressure, weakening in response to a renewed moderation in Fed hike expectations (top chart), however the distribution of relative returns among the G10 currencies is showing demand for havens JPY and CHF along with relative underperformance for AUD, CAD and NZD. U.S,” says Shaun Osborne, chief FX strategist at Scotiabank.

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