THE TAKEAWAY: U.S. consumer confidence climbs to four month high in September > Likely to boost household spending despite soft wage growth > USDJPY bullish
Consumer confidence in the U.S. rose in September to a four-month high, boosted by rising property values and higher stock prices. The final monthly reading of the Thomson Reuters / University of Michigan Confidence index (MCSI) for September came in lower at 78.3 than its preliminary reading of 79.2, but remains well above August’s print of 74.3. The consensus forecast of 66 economists surveyed by Bloomberg News had projected the sentiment index to remain little changed at 79.0.
Recent improvements in home prices and rising stock prices have lifted consumer sentiment, even as soft labor conditions and stagnant wage growth persist. However, a report released earlier today by the Commerce Department show that inflation-adjusted consumer spending stagnated in August. Persistently subdued job creation and wage growth, and concerns about the upcoming fiscal cliff of tax increases and government spending cuts could weigh on further improvement in consumer sentiment. Nonetheless, the pickup in confidence could boost household spending, which makes up about 70 percent of the U.S. economy, in the next few months.
USDJPY 1-minute Chart: September 28, 2012
Chart created using Market Scope – Prepared by Tzu-Wen Chen
The U.S. dollar rallied against the Japanese yen, its safe-haven counterpart, in the minutes after the sentiment data was released, as the rise in consumer confidence is likely to bolster household spending. At the time this report was written, the USDJPY pair was trading at 77.80 yen.
--- Written by Tzu-Wen Chen, DailyFX Research