US Consumer Confidence Numbers May Determine Short-Term Direction in the Dollar

An overnight rally in Hong Kong’s Hang Seng index initially forced a noteworthy Japanese Yen tumble, but a subsequently lackluster European equity market session erased the earlier carry trade bounce. The dollar lost 0.25 yen to 118.07 through time of writing. Those same shifts in risk sentiment initially pushed the Euro to intraday highs of $1.4885, but the single currency remains a full 110 points off of record peaks at $1.4860 through the New York afternoon. Other notable price action came from the British Pound, which posted a major recovery against the euro and other major currencies—trading to highs of $2.0720 on the day’s trade. Though the currency remains a far cry from recent multi-decade peaks of $2.1160, it remains clear that speculators seem reluctant to allow for continued cable tumbles.

Speculators subsequently look forward to tomorrow morning’s US Consumer Confidence figures and later-week third quarter GDP revisions. A busy economic calendar is likely to clarify outlook for the world’s largest economy, with current consensus forecasts predicting a widespread deterioration in economic conditions seen through key indicators. A Bloomberg News survey shows that analysts expect tomorrow’s Conference Board Consumer Confidence index to fall to fresh 2-year lows due to the highly publicized housing recession and rising gasoline prices. The result may prove especially important in assessing the strength of consumer spending through year-end holiday purchases. As such, traders should watch for any especially strong surprises out of the closely-followed confidence data. 

Written by David Rodríguez, Currency Analyst for DailyFX.com