USD: Consumer less bothered about election uncertainty – MUFG

Derek Halpenny, Research Analyst at MUFG, notes that the dollar certainly got a lift yesterday from the much better than expected consumer confidence data and price action yesterday indicates the potential for positive economic data to provide a fillip for the dollar after a series of weak economic readings.

Key Quotes

“The overall confidence index hit a new post-crisis high and was the third notable jump in the last four months. The gains were primarily driven by the Present Conditions Index, which is being helped by favourable labour market conditions. The unemployment rate stable at below 5.0% points to the potential for further consumer confidence gains going forward in the coming months.

The expectations component, which correlates more closely with consumer spending, was more subdued, perhaps reflecting the US election uncertainty although it did also gain for the third month in four suggesting less concern amongst consumers than businesses over the election outcome. 

The upturn in overall consumer confidence and in the expectations sub-component does suggest the muted start to consumer spending implied by the weak retail sales data in both July and August is unlikely to be a sign of something more sustained or problematic for Q3 real GDP. Given some warnings signs of late over the health of the US economy (muted annual growth in hours worked and weak business sentiment) the consumer confidence data is reassuring in pointing to better real GDP growth in H2 than in H1.

Fed Chair Yellen speaks today but her testimony to the House Financial Services Committee is on banking supervision and regulation so we may not get much in the way of monetary policy comment. More interesting perhaps might be St. Louis Fed President Bullard’s remarks scheduled for 1515 BST, fifteen minutes after Yellen’s testimony begins.”